Firm made accurate forecasts, holds steadfast on some sectors, urges caution on US Equity Markets and trading ranges for currencies / oil.
Ras Al Khaimah, United Arab Emirates, July 25, 2017 (Newswire.com) - Grace Century, an international Research and Private Equity Company based north of Dubai in the United Arab Emirates, has published its revised semi-predictions, as they relate to Global assets, financial environments, and markets, for the rest of 2017. Grace Century has once again been accurate on oil and a number of the currency exchange rates. The target of higher interest rates has been slow and muddled, with crosscurrents coming from an international movement and strength. The question continues to confuse most experts, as they look for signs of inflation, mainly on wages. The picture continues to also be clouded by the last of the “Baby Boomers” entering retirement age group and a changing economy going from a manufacturing base to a technology and service base.
The full report is available in detail to their members, but Grace’s President Scott Wolf comments “I think some things will never change. Inherently, the Fed will be behind the curve - they always have and in my opinion always will be. I keep hearing no inflation but I see it everywhere with the price of food, services, transportation--everything is going up. It will only be a matter of time before employers must pay more for a decreasing labor pool that is at best semi-trained. The group of “under 35’s” will benefit the most. Any way you look at it; a kid coming out of school, and asking for an entry level job for $125,000-$150,000 a year - and getting it - is inflationary”.
To our surprise, Europe has rebounded and presents significant opportunities. The gridlock in the U.S. is also a surprise, but if tax reform is achieved, this will put America back in the top slot. The saying of a “rising tide raises all boats” is an appropriate way of describing the scenario. We still believe Brexit will ultimately benefit the UK, as well as oil prices working to the benefit of all consumers.
Currency / Exchange Rates
In the beginning of the year, Grace Century called for an accumulation of commodity currencies like the South African Rand and Canadian Dollar. These have continued to appreciate with currencies like the Canadian Dollar dropping from $1.34 to, as of today’s writing, $1.25 versus the USD. Participants are urged to only add to these on pullbacks but remain favorable to both. We have stopped accumulating Sterling over $1.30, with some of our largest acquisitions at or below $1.25 versus the USD. We would look to start converting back to the Dollar at $1.50 to $1.70. One item where we were caught totally by surprise was the strength in the Euro versus the USD. When France elected a mainstream / non-nationalist President, it solidified the future if the EU and was basically a green light. We stay favorable to the yen as well until $1.02 versus the USD. In short, higher interest rates, we feel, will not affect Dollar strength since all countries will be raising/normalizing rates.
Stock Market Indices’
The U.S. market has been climbing what professionals call a “wall of worry”. As more and more people try to explain the rotation within the sectors, question valuations, and compare historical prices; the indices march higher. The question remains how high is high and how old is old? Our recommendation remains with sectors that will benefit from normalization of interest rates, namely the banking sector.
As before, interest rates will continue to support Real Estate prices. Recommended areas from the beginning of the year stay intact: Countries that have been affected by the sharp exchange rate moves, like South Africa, Europe, and Eastern Europe; incredible opportunities and values exist for buyers with capital in USD.
U.S. Interest Rates
Grace has been calling for higher interest rates for years. They have finally started to rise but at an anemic rate. We believe that once wage inflation kicks in, and with a little help of a corporate tax deal in Washington, we will start to get the move we have been hoping for. The best indicator would be a steepening of the yield curve, i.e. longer term rates paying incrementally higher than the shorter duration. We still believe we will see 30-year rates at 8%, eventually.
Gold & Oil
Grace Century stays neutral to slightly bullish on Gold. The metals have ignored all bearish factors but have not acted on bullish factors, except the recent drop in the US Dollar and rally in oil. Grace Century recognizes that there has been an unwillingness of participants to exit. If not presently a holder we would recommend the absolute smallest physical holding (1% of a portfolio). If one holds the metal we would not add.
As it relates to oil, like the equity markets, Grace Century was “spot on” with a trading range. We do not see any change. At $50 / barrel, producers and forward selling come in and at lower levels, wells stop as does selling. We see $25-$55 for the foreseeable future.”
Concluding, Scott Wolf stresses ’these are our opinions and we recognize that some are contrary to the market’s opinion.”
About Grace Century, FZ LLC
Grace Century FZ LLC is an International research and private equity consultancy located in Ras Al Khamiah, (north of Dubai) in the United Arab Emirates (UAE). Grace Century specializes in “game-changing” life science and health related private equity projects.
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Source: Grace Century