Need to Know: Shocks and surprises could damage all major economies, warns Swiss hedge-fund manager

In the fall of 2018, Felix Zulauf, head of Swiss hedge fund Zulauf Asset Managment, said investors were facing the start of a “structural bear market.” In other words, not much upside and a downside that’s limited by central banks.

“When the market sells off 20%, 25% or so, they will come in to support it, and the market rallies again,” he said at the time. “Then it fades again and it goes deeper than the last time. This is a very serious, very difficult market to have.”

Shortly after that call, the stock market unraveled, only to start 2019 with a fresh assault on record highs. Zulauf’s take has been pretty much on point, and now, operating under the assumption that the current rally is, indeed, capped, he’s following up with a mostly grim assessment of what’s next.

Zulauf has certainly made some pretty epic calls over the course of his long investment career, including when he was a top exec at UBS and moved clients completely out of equities in 1987. But he’s not your garden-variety permabear, claiming success on every downturn. He also predicted a 40% rally in early 2009, which turned out to mark the bottom of the last bear market.

He’s back to his bearish ways in our call of the day, however.

In an interview posted on the Financial Sense blog, Zulauf says he believes a trade deal between the U.S. and China is likely, but any bullish impact on the stock market will be short-lived. Investors will then be faced with a sell-the-news situation.

Meanwhile, from a macro view, Zulauf says economists have been too upbeat about prospects for growth, and, as he’s been saying for a while now, the second half is setting up to be a rough one. He sees more negative surprises this year producing shocks that could ultimately deliver substantial damage to all major economies.

Specifically, he’s looking for the U.S. to see a steep decline in growth, with China also suffering some headwinds.

“The current optimism that things are bottoming out by those who have been wrong for quite some time is premature,” Zulauf said in the interview. “I think the consensus will be disappointed again in the second half, and that will have implications for the corporate sector’s earnings situation.”

The market

Futures on the Dow YMM9, -0.05%  , S&P 500 ESM9, -0.06% and Nasdaq NQM9, -0.07% are down. The dollar DXY, +0.00% is off a bit, as is gold US:GCU8 . Crude US:CLU8 is under pressure.

Europe stocks SXXP, -0.21%  are lower to start their week. Asian equities ADOW, +0.41%  closed mixed.

The buzz

Apple AAPL, -0.48%  reports on Tuesday, so there should be plenty of buildup over the next couple of sessions. Perhaps most importantly, investors will be tuning in for word on what the company plans to do with its massive pile of cash. But it appears likely Apple will stick with its prior strategy of returning cash to shareholders. The company had $130 billion in net cash at the end of 2018.

A bidding war may be breaking out for hydrocarbon exploration group Anadarko Petroleum APC, +1.44%  . Days after the company agreed to a $33 billion sale to Chevron CVX, -0.68% Anadarko has reportedly now entered talks for a sale to rival Occidental Petroleum OXY, -0.86% say sources cited by Reuters.

The chart

Tesla TSLA, -5.04% just gave up it is No. 2 position on the list of biggest U.S. auto makers based on market capitalization. Ford F, +10.74% has just edged past the electric-car maker as its market cap nears closer to that of No. 1 General Motors GM, +1.46% Ford enjoyed its biggest one-day rally in a decade on Friday while Tesla, trading at its lowest level since January 2017, seems to be grappling with a steady stream of issues. We certainly haven’t heard the last of this Bespoke chart:

The stat
Screenshot/Disney

A scene in the latest “Avengers: Endgame” trailer

$1.2 billion — That’s how much Disney’s “Avengers: Endgame” racked up over the first five days in theaters around the world. The haul absolutely obliterates the previous opening-weekend record, which was the $641 million set by the previous movie in the series. Shares of the entertainment DIS, +1.95%   are up 1.5%.

The quote

“Our founders were highly literate people. And perhaps none more so than one Alexander Hamilton, an immigrant who arrived, thank God, before the country was full. Frankly, I don’t know why they let the guy in. Clearly somebody had slipped up at the southern border” — Historian and author Ron Chernow, speaking at the White House Correspondents’ Dinner over the weekend. Watch the full speech:

The economy

All eyes will be on the April jobs report, but we won’t get that until the end of the week. Other highlights include Case-Shiller house prices Tuesday and car sales a day later. The Federal Open Market Committee (FOMC) also meets this week, though no changes to policy are expected. As for Monday, personal income and outlays hits at 8:30 a.m. Eastern, followed by the Dallas Fed manufacturing survey two hours later.

On Friday, data showed the U.S. economy grew 3.2% in the first quarter, higher than analysts’ expectations, thanks in part to the stockpiling of goods, although it was not immediately clear how, since data showed both domestic production and imports fell in the first three months of the year.

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