The S&P 500 Index (^SPX) just had an impressive multi-week win streak. New all-time highs are piling up in global indices, too. But the real investment and trading game today is playing out in the thematic space – what we call Thematics 2.0, advises Jay Pelosky, founder and principal at TPW Advisory.
We continue to think the easy part of global macro investing and trading today is the asset allocation part: Long global equities with a non-US overweight, deep underweight fixed income (especially developed market, long-duration sovereign debt), and long commodities across the complex – with a focus on industrial metals.
We see it in our Global Multi Asset (GMA) model and our TPW 20 thematic focused model, where leadership is increasingly made up of thematic plays. In many cases, it’s not your thematic leaders of yesteryear but a new crop of themes and ETFs, leaving some old favorites by the wayside. One constant is clean energy. Parsing this new thematics space is where we are now devoting our energies.
We have been focused on the economic and market ramifications of our TPW Spending Supercycle and how it underpins our Global Growth Long Cycle thesis. It also supports our belief in an earnings-driven, secular change of global equity leadership away from the US to the Rest of World (ROW), led by Emerging Markets (EM).
More recently we have integrated this Spending Supercycle with the “Constructive Strategic Stability” agreement that came out of the recent China–US Summit. We believe this agreement paves the way for a continuation of thematic development and deployment centered around China’s buildout of the industries of the future.
The combination of these two is now igniting a new wave of thematic investment, Thematics 2.0.
