Blog
Worth Revisiting UK Equities
The tectonic political shocks of the last two years have left UK equities feeling unloved. In US dollar terms, UK equities have returned -5% year-to-date, underperforming the majority of developed and major emerging markets (top-left chart). This is despite the...
read moreThe UK’s Deleveraging Failure
The synchronised nature of the global economic recovery has fanned speculation that the post-crisis deleveraging in developed countries has finally come to an end. However, we err on the side of caution and cite evidence from the UK, which suggests there has been...
read moreHeadwinds for US Manufacturing
The US manufacturing ISM is currently at levels last seen before the 2008-09 recession. While this reflects the recent optimism about growth prospects in the US, we see several headwinds to the industrial sector. The top-left chart shows the ISM against the VP...
read moreFade BoC Rate Hikes
This post is taken from our March 13th weekly report. In our February Monthly we suggested selling CAD, and buying Bankers’ Acceptances (BAs), the Canadian analogue of Eurodollar futures. With ~64bps of rate rises priced in from the BoC over the next year, we saw...
read moreGlobal Trade and the Dollar
This post is taken from our March 6th weekly report. Once again, trade wars are a potential risk, with Donald Trump threatening to impose tariffs on steel and aluminium imports, and other countries responding that they may impose retaliatory taxes on US goods. The...
read moreWatch Food Prices for Risks to EM
EM CPI inflation is at multi-year lows at present (top chart), with a clear divergence between world food prices and EM CPI. Food tends to be one of the main components of EM inflation baskets, on average accounting for a 30% weighting. A lot of agricultural...
read moreUS Inflation Fears Overblown
A key risk for investors remains an US inflation overshoot. US inflation breakevens have been rising since the start the year (top-left chart), however we believe this is more a reflection of market pricing returning to fair value than the start of a self-perpetuating...
read moreCost of FX Hedging Pushing Yen Higher for Now
One of the strongest performers against the USD lately has been the yen, with USDJPY now probing 15-month lows. One of the main drivers has been the surging cost of FX hedging (assume rolling 1 year FX forwards). The top-left chart shows the pick-up for a yen investor...
read moreUS/Global Growth Multiplier Drags USD Lower
This post is taken from our January 30th weekly report. The dollar broke through the critical 90 level on the DXY, after comments from US Treasury Secretary Steven Mnuchin supporting a weaker dollar. (The timing of the comments at such an important level we don’t...
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