Head of BofA Global Research
Looking for a good reason to finally buy that classic car you’ve always wanted? This week we present the case for owning real assets (yes that includes collectibles) and the latest read on supply chain decoupling.
Chief Investment Strategist Michael Hartnett presents a compelling case to own real assets, such as real estate, precious metals, wine, art and cars.
Real assets appear cheap when compared to financial assets, with U.S. stocks at an all-time high compared to U.S. housing, bonds at an all-time high compared to diamonds and commodity returns at a multi-decade low. Hartnett points out that real assets can act as a hedge against inflation, which could be at an inflection point for both secular and cyclical reasons.
Investors are beginning to recognize the potential benefits of owning real assets, which now make up nearly 6% of total ETF market cap, according to Bloomberg.
Shortages and on-shoring were common themes at our Asia Pacific Conference, in which 700 investors and 200 companies participated across Technology, Media and Telecom industries.
Research analyst Robin Cheng noted that strength in semiconductor demand is broad-based (PC, consumer, autos, industrial & mobile), driven by both secular (5G, electric vehicles & artificial intelligence) and cyclical forces.
Meanwhile natural catastrophes—drought in Taiwan, earthquakes in Japan, and freeze in Texas—have shut down facilities, constraining capacity, driving up prices, and potentially extending supply tightness into 2022.
Supply chain risks have added urgency to U.S. and China’s attempts to become more self-sufficient in chip production. We see East-West supply chains increasingly decoupled, leading to higher capital spending by semiconductor manufacturers.
Decoupling is also occurring in advanced semi-chips, production equipment, design automation, 5G and undersea cables.
We wish anyone celebrating next Sunday a Happy Easter. “Must Read Research” returns on April 11th.