Bloomberg has asked seven of 2016’s top performing hedge funds where they see the best trades for 2017. A few themes dominated: the resurgence of energy and commodities, trading Trump’s policies, and how inflation versus rates plays out for bonds. On energy, Contrarian Capital makes the case that US energy stocks, as we are seeing here with mining, are well positioned to drive strong ROE after restructuring in the lean years. There are many angles to trading Trump, but Black Diamond fund warns that we could witness global depression and market collapse if a border adjustment tax is enacted. On bonds, CQS sees inflation coming, and likes the quasi-equity nature of con notes to trade it. Strangely, inflation is still a guaranteed yawn-fest for most investors, and even using the word 'Inflation' in a headline here at Livewire will guarantee the wire will bomb. My money is on this all changing quickly as the inflation genie escapes from the lantern. Refer my 'Exhibit A' below showing inflation in EU, US, and Aus, and have a chew on the Bloomberg article for some hedge fund thoughts on how to play it - and much more: (VIEW LINK)
Re inflation, keep an eye on the situation in California. According to some reports, millions of acres of farmland has been flooded as a result of the recent storms. California is a major exporter of fruit and vegetables, and so any supply issues there could result in higher prices for a wide range of agricultural commodities.