The VP Research Blog
A blog about financial markets and the VP investing framework
Investors fully invested, but negative
We have a buy signal on AAII sentiment. Bearish retail sentiment often offers contrarian signals to enter the market and as the top two chart shows there are very few bears at the moment according to the AAII survey. This argues for a short term bounce. However,...
The euro to be supported in risk-off scenarios (mostly)
The ECB’s commitment to extra loose monetary policy through forward guidance and QE has resulted in the euro to becoming one of the darlings of the funding currencies. US corporates such as Nike, Apple and Coca-Cola have taken advantage of a weak euro to raise the...
Money surges in Europe, growth to follow
If you ignore the ongoing Greek sideshow, rarely has European money growth been as accommodative as it is today. Europe has enormous structural problems of too much debt, an inflexible currency and an ageing population, but cyclical factors are very positive. Leading...
A Primer on the Euro Breakup
Many economists expect catastrophic consequences if any country exits the euro. However, during the past century sixty-nine countries have exited currency areas with little downward economic volatility. The mechanics of currency breakups are complicated but feasible, and historical examples provide a road map for exit.
The real problem in Europe is that EU peripheral countries face severe, unsustainable imbalances in real effective exchange rates and external debt levels that are higher than most previous emerging market crises. Orderly defaults and debt rescheduling coupled with devaluations are inevitable and even desirable. Exiting from the euro and devaluation would …
A False Sense of Security in the UK
The UK's economy is increasingly beginning to resemble how it looked prior to the financial crisis - this is not healthy and leaves the UK vulnerable to a repeat of the last crisis. In this presentation, we discuss that UK growth did eventually return after the...
Credit in UK Booming Again; Wage Growth Has Lagged
There are continuing signs the UK’s economy is increasingly resembling itself prior to the financial crisis. House-price growth has cooled of late, but is still growing at 4.6% YoY, down from almost 12% last summer. Consumer credit is also growing at a healthy clip,...
Tactical Buy on NZD
(from our Tactical from 2nd of June) We only have one tactical signal this week, a buy on NZD. The VP Divergence Signal looks at correlations to detect when an asset is trading out of sync with other related global macro assets. This provides a good short-term proxy...
Manufacturing and Services PMIs Diverge
There has been a sharp divergence between ISM services and non-services in the US. Many of our leading indicators for manufacturing have pointed to weakness. This suggests demand is tilting away from manufacturing and towards the service sector. The breakdown of the...
US Growth Coming in As Expected
(The following is from our December Leading Indicator Watch (LIW), released December 4th, 2014. The LIW is a monthly report giving a summary of all or our main leading indicators, allowing clients to forecast early on where the business cycle in major countries is...
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