12 Years of VP vs Noise
Sharing the ideas and experiences that have influenced our work
Adding Back Central Bank Ambiguity
Central banks are adding more ambiguity back into their reaction functions. This points to higher global rate volatility After years of repression, rate volatility is beginning to rise. This is not only a reflection of greater macro-economic volatility, but -...
Too Early for a New Dawn in the UK
The UK’s successful vaccination programme has fuelled speculation of a rapid recovery. However, barriers to post- Brexit trade and a slow easing of lockdown restrictions pose serious risks. It is premature to suggest UK underperfomance is over After a wobbly start to...
Equities and Yield Regimes
We look at the performance of equities and intermarket relationships across different real yield and inflation breakeven regimes. Today, real yields are starting to drive changes in nominal yields, which is supportive for equity gains In a recent report for clients,...
Sustained Eurozone Bond Sell-off Would Raise Chance of Yield Curve Control
Rising bond yields and tightening financial conditions pose a risk to the economic recovery and, in the euro-area, could increase the probability of the ECB formally adopting YCC The recent sharp sell-off and bear steepening in global sovereign debt markets has stoked...
Food Inflation Tailrisks
Food prices are correlated with EM inflation surprises. The current surge in soft grain prices should be monitored in case it spills over into general inflation expectations Food inflation can have outsized impacts on inflation expectations due to the higher frequency...
The Next Commodity Supercycle
There are three big drivers of the commodity supercycle: (1) The long era of monetary-policy dominance is over, leading to a heightening of inflation risks not seen since the 1960s, (2) Investors are deeply underweight and will need real assets such as commodities as a hedge against inflation, (3) Commodities are generationally cheap, both compared to themselves and to other assets
Stay Cautious on UK Stocks
UK equity valuations are among the lowest in DM, but caution is still warranted. We wait for an upturn in our LEI before considering longs in UK domestic stocks UK-specific risks subsided sharply following the conclusion of a bilateral trade deal with the EU at the...
Fed Efforts to Stem Rises in Yields Back on the Table in 2021
Rising yields - driven by increasing inflation expectations after the Democrats’ unexpected clean sweep - are a risk for equities. If yields keep rising then the Fed will be forced to intervene to keep longer-term yields lower At the end of last year we discussed the...
Brazilian Real Pressures Starting to Ease
A rebound in economic activity and near-term stabilisation in the fiscal accounts has alleviated pressure on the Brazilian real Although the economic outlook in Brazil remains shrouded in uncertainty as the Covid pandemic continues to rage, pressures on the currency...