10k Words - August 2020

 Apparently, Confucius didn’t say “One Picture is Worth Ten Thousand Words” after all. It was an advertisement in a 1920s trade journal for the use of images in advertisements on the sides of streetcars. Even without the credibility of Confucius behind it, we think this saying has merit. Each month we share a few charts or images we consider noteworthy. 

Focusing on drivers of stock valuation, we see corporate bond yields converge with equity yields in the US, as strategist Christophe Barraud highlighted. Verdad studies the impact on "terminal" valuation of long-term growth and discount rate assumptions (no surprises that low interest rates and optimistic growth rates boost "growth" stocks); while George Mason University identified significant sectorial shifts in beta (the measure of the extent to which a stock's moves magnify market moves). Listed private equity in the US is still recovering from the March 2020 sell-off, while Cannacord highlights ASX media sector positioning for COVID-19. Data from Yelp showed permanent business closures rising in the US as GDP plunges. Finally, in Australia we see Australian Treasury banking on a "V" shape recovery in the budget deficit.

Convergence of corporate bond and equity yields

Source: @C_Barraud, Bloomberg

Terminal Period Weight in Equity Valuation Given Long-Term Growth and Discounting

Source: Verdad

COVID-19 driving shifts in "Beta"

Source: WSJ, George Mason University

Listed Private Equity Share Price Performance

Source: Bloomberg

ASX Media Sector Positioning for COVID

Source: Canaccord

Food retail closures as per Yelp data

Source: WSJ, Washington Post, Yelp

US GDP Growth Interrupted

Source: US Bureau of Economic Analysis

Australian Federal Budget

Source: RBA, Australian Treasury, AMP Capital

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