The VP Blog

A blog about financial markets and the VP investing framework

Use Risk Rally to buy Default Protection

This post was taken from our March 5th weekly report. In line with rebounding equity markets following the 4Q18 correction, credit risk-premia have compressed sharply. This is particularly notable for the big political risk plays of 2018. UK CDS spreads have narrowed...

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Death by Extrapolation

Extrapolation has killed more people, companies and portfolios than almost anything else we can think of. You assume that you’ll continue to be healthy until you get that cancer diagnosis or fall to the floor from a heart attack. You assume profits will continue to...

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Outsize demand for risky Italian bonds

Going by the strength of demand at recent Italian sovereign bond auctions, it would be easy to forget that the government was recently locked in an acrimonious dispute with Brussels over its budget deficit target for 2019. Now that the budget fiasco has died down,...

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Eurozone deflation risk remains

Market momentum is building behind the global growth slowdown narrative, with last week’s downbeat European Commission forecast report triggering a safe-haven bid. The eurozone, in particular, is caught in the crosshairs with the German and Italian economies buckling...

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Things are looking up for US energy

US energy equities have been the worst performing sector on a trailing 12-month and 6-month basis (top-left chart), with most names falling below their 200-day moving averages. The top-right chart shows that historically whenever less than 5% of the constituents in...

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Room for UK Consumer Staples to Catch Up

This post was taken from our January 22nd weekly report. In line with the global rebound, UK equities have regained considerable ground in January following the fourth-quarter sell-off. However, consumer staples have underperformed, creating a sharp divergence with...

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Buy the USDCNH Dip

VP’s China leading indicator has shown few signs of rebounding and remains in negative territory, presenting a persistent headwind to the RMB. Historically a negative China LEI has led capital outflow by about 6 months and points to further outflow pressures (top-left...

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Trading a Bear Market

This post was taken from our January 8th weekly report. We would characterise US equity indices today as being in a bear market. The official definition is a 20% decline from the recent high, close to close, but what does this mean in practice for investors? (The S&P...

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