The VP Blog

A blog about financial markets and the VP investing framework

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...

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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...

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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...

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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...

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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...

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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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High Dividend Yield Strategies Require Care

Falling yields across the developed market world have posed greater hurdles for investors with yield and income targets. As the spread between bond yields and equity dividend-yields diverge, these investors move up the risk spectrum to meet their targets. As such, we...

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Markets Unconvinced of Further Easing by RBNZ

The RBNZ surprised markets by cutting the official cash rate by a greater than expected 50bps, front-running further expected easing from the FOMC, and RBA. Governor Adrian Orr commented that negative rates are “within the realms of possibility”. Despite this clear...

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Fed Easing sees Defensive Stocks come out on Top

Over the last five Fed easing cycles consumer staples, healthcare and energy provide the highest average total return above the index one year after the Fed’s first cut. This is not too surprising given that the Fed started cutting as recessions loomed in 2007 and...

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