Juan Correa-Ossa

What drives long term equity returns? Many people think it is economic growth. And yet, several studies have shown that GDP growth has zero correlation with long term returns. So what should you pay attention to? In a recent piece we broke down returns for 33 countries over the past 26 years into several components. Our results showed that net buybacks (essentially equity dilution) were the most important driver. This is in line with other academic research on the subject. Dilution explains why countries like China that experienced economic miracles had such poor equity performance. Corporate profits as well as stock market profits soared, and yet EPS was very poor due to extreme levels of issuance.

@felixavp 🤣 respecting DBZ lore is an important issue for my demographic

Love the spirit monsieur but this is a kamehameha. Technically it means you are fighting each other

Flow through Hormuz is still a trickle (below is 7-day moving total which used to average over 800 pre-war). However direction of travel is positive for now and does show Iran might be more willing to earn a bounty from its hostage than kill it altogether

When the war begun US stocks quickly erased a good chunk of their YTD underperformance vs RoW. However after that move in the first week, the downtrend seems to have resumed.

From The Western Front in WW1 to The Pacific Theatre in WW2, to the SPY order book today. The battlefield evolves.

Looking at the history of oil supply shocks, most of them saw oil peak within three months of the war outbreak - the two shocks of the 1970s being the glaring exceptions.

S&P futures up on the week in NY session. Never underestimate the American Dipbuyer

Very quietly, US home affordability back to the best level since early 2022. Now very close to 1990s average levels.

My friend @Geo_papic is essentially both

So far, 2026 has been a fantastic year for equity investors as long as they stayed away from US tech

Big divergence between US and RoW financials this year. Software exposure getting smashed by the market

Or imagine telling them you could earn a salary as a “macro strategist” LMAO

One important factor to keep in mind is that most people today work in occupations that did not exist in the mid 20th century. Changes in technology and tastes create a need for new occupations. Imagine telling a WW2 soldier that you could earn a salary as a drama therapist.

The academic explanation of these from what I understand is that they are the result of people's preference for lotteries. Junk is always cheaper than quality. However it does not seem to be as cheap as it should be, which means that junk gets overbid relative to quality. There are some studies of institutional ownership pre-GFC which showed that active managers used to favour high vol over low vol because of their incentive structure, which encouraged buying big winners. This made high vol overbid relative to low vol. To your point though, this is no longer how the hedge fund space operates (in fact the opposite).

In academic finance, there's this concept called "anomaly" as in investors *seem* to be able to consistently earn higher (beta adjusted) returns than the market by going long certain ex ante systematically predictable characteristics. Thousands of such anomalies have been found over the last 40 years. Most of them you could conceive of a plausible rational explanation. Momentum for example you are compensated for bearing the occasional crash risk. Value you are bearing potentially business cycle risk or simply harvesting a behavioral bias of investors overpaying for glitter/growth. "Quality" (or low vol) is the one factor that has never really made sense to me and has always felt like a true "anomaly" to me. Secretly, I keep wondering if it's simply an artefact of the last 15 years of low interest rate reaching for yield environment and AAPL at low teen multiple grew to be a richly priced perfect company. Costco/Walmart became 50x PE. All bc investors were starved of yields from bonds and just bought these stocks instead and bid them up way beyond what could be rationally justified.

@stevehou US market.* International stocks have been on fire.

Market hasn't gone anywhere since last Oct.

In contrast to the Dot-Com bubble, mega cap tech valuations are much less extreme today (only a small premium to the market). I think this is one reason for why the rotation to value/cyclicals from tech has not been too violent for the indices.

@JWnFL007 This particular chart is financing casflow. Essentially capital distributions minus capital issuance. So on net the hyperscalers are now raising more capital (so far mostly debt) than what they are giving back in shareholder distributions.

The era of tech buybacks has ended.

Hell hath no fury like a Fed nominee scorned

I think one boring but underrated reason behind the weakness in the dollar and the strength in metals and international stocks is that we are in the middle of a cyclical reacceleration.