The VP Blog
A blog about financial markets and the VP investing framework
Intermarket Gauges suggest recession or risk-on
The S&P has been very resilient this year in the face of slowing growth, falling earnings and trade war uncertainty. However, underneath the surface, market rotations have been very bearish. Over the past year, high-yield credit has underperformed investment grade...
Global Trade Key Driver of EM Returns
Since the peak back in April, most EM equities markets have seen declines or consolidation (top-left chart). The temptation is to view this as a buying opportunity to front-run more aggressive central bank easing (especially from eg the PBoC in China). Although we...
Yields suggest Monetary policy is close to its limits
This post was taken from our weekly report, dated October 15, 2019. In the last month yields have since then done a round trip, falling and then rising again, but crucially term premium (TP) has not fallen. It was TP’s relentless fall through 2019 that meant the...
G3 Central Banks set Tone
The divergence in monetary policy across developed markets since the beginning of 2018 is starting to breakdown as Fed and ECB easing makes it increasingly difficult for the hawkish hold-outs to tighten. Above-target inflation in 2018/early 2019 provided cover for the...
Momentum under fire as confidence softens
With consumer confidence measures released a couple of weeks ago, we have observed an interesting divergence between the University of Michigan consumer sentiment index and Conference Board consumer confidence index (top-left chart). When we plot the spread and...
ECB piling easing pressure on BoJ
Japanese equities have fallen out of favour with foreign investors over the past four years, since the initial euphoria of Abenomics faded (top-left chart). This has contributed to Japanese equities’ relatively low valuations, with the Topix becoming increasingly...
Markets Vulnerable to Shock of Higher Food Prices
The sharp slide in agricultural commodity prices this year has squeezed long trades, with net non-commercial futures positioning in corn now close to neutral (bottom-left chart). Corn has suffered the most precipitous drop, with high planting rates driving futures...
Rising Pressure on BCB for FX Intervention
The BCB reportedly stepped into the FX market last week with a spot sale of dollars that was not accompanied by a repurchase commitment or other intervention measures - the first time this has happened in a decade. The move to stem the slide in the BRL has been...
Early Indicators of SNB Intervention
We previously highlighted the significance of the 1.10 level for EURCHF – a level which would likely trigger intervention from the SNB. The central bank has previously sought to weaken the franc when EURCHF has been below this level and, despite an arguably weaker...
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