The VP Blog

A blog about financial markets and the VP investing framework

Worth Revisiting UK Equities

The tectonic political shocks of the last two years have left UK equities feeling unloved. In US dollar terms, UK equities have returned -5% year-to-date, underperforming the majority of developed and major emerging markets (top-left chart). This is despite the...

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The UK’s Deleveraging Failure

The synchronised nature of the global economic recovery has fanned speculation that the post-crisis deleveraging in developed countries has finally come to an end. However, we err on the side of caution and cite evidence from the UK, which suggests there has been...

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Headwinds for US Manufacturing

The US manufacturing ISM is currently at levels last seen before the 2008-09 recession. While this reflects the recent optimism about growth prospects in the US, we see several headwinds to the industrial sector. The top-left chart shows the ISM against the VP...

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Fade Bank of Canada Rate Hikes

This post is taken from our March 13th weekly report. In our February Monthly we suggested selling CAD, and buying Bankers’ Acceptances (BAs), the Canadian analogue of Eurodollar futures. With ~64bps of rate rises priced in from the Bank of Canada over the next year,...

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Global Trade and the Dollar

This post is taken from our March 6th weekly report. Once again, trade wars are a potential risk, with Donald Trump threatening to impose tariffs on steel and aluminium imports, and other countries responding that they may impose retaliatory taxes on US goods. The...

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Watch Food Prices for Risks to EM

EM CPI inflation is at multi-year lows at present (top chart), with a clear divergence between world food prices and EM CPI. Food tends to be one of the main components of EM inflation baskets, on average accounting for a 30% weighting. A lot of agricultural...

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Cost of FX Hedging Pushing Yen Higher for Now

One of the strongest performers against the USD lately has been the yen, with USDJPY now probing 15-month lows. One of the main drivers has been the surging cost of FX hedging (assume rolling 1 year FX forwards). The top-left chart shows the pick-up for a yen investor...

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US/Global Growth Multiplier Drags USD Lower

This post is taken from our January 30th weekly report. The dollar broke through the critical 90 level on the DXY, after comments from US Treasury Secretary Steven Mnuchin supporting a weaker dollar. (The timing of the comments at such an important level we don’t...

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