In response to the COVID-19 shutdowns, governments and central banks around the world have embarked on an enormous monetary and fiscal experiment, the scale of which has not been seen before. In the space of a few weeks, the US Federal Reserve added more to its balance sheet than the entire period between 2009 and 2014. Meanwhile, additional spending measures combined with falling tax receipts are expected to see the US deficit soar to US$3.8T in 2020, almost 20% of GDP.

US Federal Reserve balance sheet (USD millions)

But in the face of this massive stimulus, demand has fallen off a cliff, the economy has stopped, and unemployment has spiked to 1930's levels.

Sean Fenton from Sage Capital says we're seeing a massive tug of war between liquidity and economic fundamentals, and it's not clear yet which side will win.

"This is an experiment that has no defined end point for how it turns out, just a range of possibilities. Those possibilities are very wide, and can have some divergent outcomes."

But what are the implications of all this for markets? And how are investors supposed to position for such an environment? We discuss this in the latest episode of The Rules of Investing podcast. He also tells us about his highest conviction investment right now, and shares his view on whether we'll see a new high, or a new low first.

Time stamps

  • 4:03 - The biggest challenges of launching a new business through COVID-19
  • 5:41 - Indicators that Sean has identified to position for the pandemic
  • 10:50 - What are credit spreads telling us now?
  • 13:30 - What is pushing stock prices up at the moment?
  • 16:12 - Implications of heavy money printing and investment opportunities brought by it
  • 22:55 - Flight Centre and Casino stocks - what’s the investment case?
  • 25:54 - Has the market priced in risk?
  • 28:02 - The pandemic’s flow on affects that haven’t been fully appreciated
  • 33:33 - Emerging trends from COVID-19
  • 36:58 - Sean’s highest conviction investment now
  • 40:10 - Which way does the market go from here?
  • 44:03 - Sean answers our three favourite questions

Book discussed: Philip Tetlock - Superforecasters: The Art and Science of Prediction

Learn more about Sage Capital

Sage Capital provide investors with access to risk controlled, active equity returns through a unique investment process that combines quantitative analysis with deep fundamental research. To find out more visit their website, or click contact below.

Barbara Schroder

Another brilliant and interesting interview. Very much appreciate Sean's generosity in sharing his insight and honesty about the current market . All highly educational for those trying to best manage their selfies.

Harry Imber

is there a transcript to come----I hope you don't mind but I find it quicker & easier to read compared to listening. Thank you Harry Imber

Peter Ralph

Agree with Harry. Transcripts leave podcasts and videos for dead. Everyone is time-poor these days and we don't want to waste time listening to stuff we already know.

Ted Mulholland

I would also like access to a transcript as I have a material hearing disability.