There is no doubt in my mind that the epic US equities bull market is now over since the S&P 500 index broke its 200 day moving average while I was at the wonderful StanChart suhoor with so many old pals from the 1990’s Al Mankhool salad days when the Mexican food at Zodiac/Bordertown in the Imperial Suites provided the hottest salsa (mirchi) in Rolla road, where I also lived in a ritzy duplex called the Pearl of Rolla.
There is also no doubt that the US economy is headed for recession. The fall of the US dollar and free fall in crude oil means a liquidity squeeze in the Gulf’s assets/property markets. Trumpnomics took precisely one month to destroy American exceptionalism, world trade, the climate change consensus, development aid to fanon’s wretched of the earth, NATO and the geopolitical balance of power in Europe.
As I had posted 2-months ago, the Mag-7 morphed into the Lag-7 and now the Sag-7 with Tesla having lost its entire 140 point post election pop. Even I, a table pounding bull on Alibaba at 85 and JD at 30, have been stunned by the 65-70% rally in these iconic Dragon Empire e-commerce cloud computing AI platforms. The Nas-100 is down 10% in the first two months of 2025 while China Tech is up 40% and the German Dax is also in a frenzied bull run, led by the Rheinmetall AG’s 74% spectacular rise since my post a month ago. Achtung baby, wunderbar!
These are epic times in the global markets and King Dollar has now been dethroned by King Euro at 1.0861 and King Sterling at 1.2911. God Save Our Gracious Queen Camilla Shand and her husband Bonnie King Charlie! The mediocre jobs data only reinforces the smart money conviction that it is now mission critical to bailout the greenback’s sinking ship and switch to Europe, China, EM, UK and value. Pegged currencies will feel the big chill of a deflation in their illiquid private markets.
Tariff lunacy, mass deportation and Hurricane Elon’s DOGE storm troopers of MAGA have condemned the US economy into a protracted slump. The Atlanta Fed’s -2.8% Q1 GDP Now estimate is only the tip of a very radioactive iceberg. I believe emerging market value is the cheapest asset class in the world especially when combined with a sterling balance sheet, a Threadneedle Street regulatory umbrella and a CEO who was my classmate at Wharton and a colleague at the Court of J.P. Morgan. This means a deep dive into the risk/reward calculus of StanChart Bank shares, a brand I have known all my life since my boyhood in Dubai.
When the Euro and cable are up 4% in a week, history tells me that the world has entered a period of sustained US dollar and US risk asset underperformance. History also tells me that a rise in liquidity risk premia, the Volatility Index and a glutted crude oil market means nemesis for the private equity, venture capital and real estate bull markets in the GCC, whose pegged currencies make monetary contraction and an outflow of hot money flows from the region inevitable, as happened in 2009 and 2014.
Stan Chart was a beauty at 800 pence but has now met my 1200 pence target on the LSE. I know the coming bear market will give me another shot at buying the bank that Bill Winters has so brilliantly steered. Ideally in the 800-900 pence range. DBS owns a 19% strategic stake in Stan Chart, so I doubt if any Third World bank can act as a predator or pass its governance sniff test but a J.P. Morgan bid will also not happen now as the transition for the post Jamie era gets going.
A trade war between China and the US is lethal for the bank’s lending, wealth and trade finance franchise in Asia while an oil price crash could gut earnings in its extensive Gulf/MENA bottom line and a global recession devastates project finance/corp fin in Africa as the EM sovereign default dominoes fall once again as in the Asian flu. The golden age of deregulation and cross border M&A will not happen under Trump, the reason why Goldman Sachs has lost 100 points from its recent 672 high. Yet I am not remotely interested in nibbling at GS until the shares fall to at least 450.
Stan Chart operates in dozens of emerging market countries, who now face the worst credit crunch milieu since the GFC as the debt service time bomb explodes. The high priests MAGA will defang/defund the IMF and the World Bank next. So bailouts for Uncle Sam’s bankrupt Cold War sovereign kittens are now taboo. Starve baby starve is the new mantra.
Stan Chart also has deep structural issues with its business model. AML, KYC, regulations in dozens of EM states at a time when Trump has weaponized the dollar settlements market on which it depends for its daily bread imposes draconian regulatory costs. The bank is also dwarfed in Asian markets by local national champion banks. The Q4 earnings beat and the share buyback program have taken Stan Chart above its 2015 peak when Winters succeeded Peter Sands. The bank was still wounded from the $250 billion Iran payments scandal when the New York bank regulator called it a “rogue institution” and fined $667 million for making America (“vulnerable to terrorism”), this is not the ideal legacy in the Age of Trump 2.0 and American First. The regulatory wrath of Uncle Sam could be provoked if it crosses Washington on China. As the Victorian surgeons of the old school used to advise – when in doubt, cut it out.
Also published on Medium.
