Control the controlables

“Control the controlables, mate.”
—McLaren race engineer Tom Stallard, radio message to Oscar Piastri, telling him to stop whining after being overtaken by his team-mate in the first round of the Singapore GP on Sunday.
[Editor’s note: “control the controlables” is like a nowcasting/risk management motto.]

Based on just one survey, the global economy is in recovery mode:

Reading help: If the 24-month moving average of the Global Expectations Index of the Sentix survey shown is rising, the average annualised return of the MSCI World Index is 9.1%. This occurs in 82% of the time since January 2003, as per insert in the exhibit above. When the average is falling, the average return is a lot smaller, i.e., around 2.7% per year. We look for these asymmetries. There is even a book on these asymmetric returns.

GDP growth forecasts remain rising and the loser’s are nowcastable:

Being able to identify loser’s important when controlling the controlables.

In the short term, earnings estimates keep being revised upwards:

The most important sector keeps shooting the earnings lights out, mostly:

Valuations are, well, “streched.” SPX valuation is in the 100th percentile on nearly any standard or esoteric valuation measure.

Reading help: If this ratio were to mean revert to 26.4, SPX would need to fall 76% to 1,596 for oil to remain constant, or oil would need to rise to 254 with SPX held constant at 6715.

Honeymoons end. The key controlable is risk. At the moment, “all is well:”

Trivia: