Archive - Out of the Blue

2021 is confirming itself, as we feared, to be very contradictory. We are clearly at a delicate turning point on three fronts: economic, financial and pandemic. The exit from the pandemic tunnel seems close and the global economy may be on the threshold of a historic economic boom. But it's not all gold that glitters: the huge injections of liquidity and public spending will not be exempt from side effects partly worse than the problems they would have wanted to solve...

The optimism, with which 2021 has started, continues to belie the skepticism that BlueStar has been nurturing for a few months. Intellectual honesty (which is different from consistency) remains a guiding star for us. If the facts change, we must have the courage to change opinion, but dressing up as bears or bulls depending on which way the wind is blowing does not belong to us.

Totally unexpected, at least as far as I am concerned, Mario Draghi was given the mandate to try to form a new government, which he has accepted with reserve. Never ever would I have thought that an Iconic person of IMMENSE international stature could accept to get muddy in the swamp of current Italian politics.

Last week the market celebrated the inauguration of Joseph Biden Jr. with another rise. The real good news, and we rejoice, is that the world has finally gotten rid of Donald, hopefully forever.

At the end of a year that has been terrible from an economic, financial, health and psychological point of
view, we may see the light at the end of the tunnel.

We warmly welcome Mr Trump's defeat, even though we are waiting to see if Mr Biden can really save theUS from the chasm to which they have been dangerously close for some years now. The real "bomb" news of the moment, however, are the comforting results on the effectiveness of two vaccines.

The economic recovery after the apocalyptic Q2 is certainly in place but it is no longer news, meaning that it has been widely discounted by investors (except the usual IMF “scientists” who arrived there, with their traditional timing, only now) and there are now doubts about the actual strength of the cycle for Q4 and 2021.

After a dramatic 2Q and an explosive 3Q, we could expect a 4Q of relative stasis before a new acceleration in 2021. Considering what the markets have already done, the lack of particularly positive surprises for 4Q could weigh negatively.

We have often heard of TINA (there is no alternative) and FOMO (fear of missing out) to explain, in a simplistic
way, the equity rally despite everything. We would now add another acronym, ROMO (reality of missing out):
few of us were expecting the seemingly counterintuitive rebound of the last four months and even fewer
investors participated in it.

The strong rebound of the last two months has been classified as the most "hated" in history. Objectively, we
did not expect such a rapid return of these conditions and therefore it should come as no surprise that
optimism on the markets has returned.

After the apocalyptic month of March, in which the stocks entered a bear market faster than ever seen in history, they turned around just as fast. Especially the American markets, with the S&P500 returning to -9%YTD and the NASDAQ 100 even reaching +6% YTD.

“Surreal” is the best word to describe the situation that we've been experiencing for almost two months.Deep anxiety and uncertainty about the future are accompanying us.

The global spread of Covid-19 has caused panic on the markets which in just a short time has set off a series of historical losses. The only beneficiaries of this situation have been quality government bonds and gold, which benefited by the exogenous shock.

Santa Claus did not put a lump of coal in our stockings last year, quite the reverse. Unlike 2018, the stock markets ended a very positive year on a high note and, unusually, this coincided with a strong bond market as well.

The progress of the market in an already very positive 2019 also continued in the month of November, confirming the tradition of the so-called "Christmas rally."

Against all our expectations, October turned out to be one of the best months for the equity segment in the apparently unpredictable - but in the end very positive - 2019.

When it seemed that the market had gained new strength and was about to breach the value highs for the year, some bad news from the macro data harmed the mood.