The VP Research Blog
A blog about financial markets and the VP investing framework
The composite eurozone January flash PMI showed accelerating expansion led by Germany, but the PMI readings are still only showing moderate growth, considerably below the momentum achieved, for example, in the 2009/2010 green-shoots revival. What growth we do see will be low in comparison with earlier times and if real money growth continues to lose momentum, we might even see renewed weakness.
The debate on EM economies (and equities) is heating up. Initially this week, we had the financial world equivalent of the pillory with the widely reported closing of a high profile US hedge fund’s EM fund due to heavy losses in 2013. Solemn nodding followed by EM naysayers suggesting that this is truly a sign of the death-knell of EM as an asset class. The stakes are being raised elsewhere too with the media pitting seasoned investment professionals on both sides of the fence in recent weeks.
Global growth has been well supported going into this year, and short-leading indicators had intimated this would continue into the latter part of the first quarter. However, data has become more mixed with some releases giving cause for concern. Some US data may...
The AUD has been under strong pressure in the past 12-18 months. A slowing Chinese economy, an unwinding housing and mining boom and a dovish RBA have all been contributing factors. Many of these reasons are still valid reasons to be fundamentally negative on Australia, but as we have pointed out since the beginning of the year the AUD was due a tactical rebound.
Gone are the days when financial advisory could boast the same professional stability as a well seated doctor or lawyer. Herding people through the door and offering them a standard 60/40 portfolio invested in the in-house equity and bond funds was a simple and lucrative business model but it does not work anymore. Competition and technical innovation have already changed the industry of professional personal investment advisory and it will be sure to effect radical change for years to come.
Emerging markets are being blamed on just about all hiccups and bad surprises currently befalling the global economy and financial markets. However, this is slightly unwarranted and, in any case, not consistent with the evidence. Out of the 9 equity markets up on the month, Indonesia, Hungary, Peru, the Philippines and the Czech Republic are among them.
A recent piece by Ellyn Terry, an economist at the Atlanta Fed, provides important evidence and information on the drivers of the decline in the US labour force participation rate. The interesting aspect of this small study is that it breaks down the drivers on age groups which allows us to get a much closer look at the recent trends in the US labour force participation rate
UK inflation last week came back to the BoE’s target for the first time since 2009. This should most certainly be a boon for consumers whose average real incomes have been negative for several years. However, our UK Future Inflation Index, which gives a reasonable 6...
Investors welcomed the vow made last year by the new Chinese government to reform the economy through a clamp-down on shadow banking and excess liquidity as well as to commit to a strategy of re-balancing the economy. Still, it seems difficult for China to break out of its old ways. Data released this week consequently shows FX reserve growth in China surging towards the end of last year.