Sky-High Corn Price adds to Inflation Pressures

With the US and Chinese trade positions hardening, market sentiment has swung into risk-off mode with oil sliding, equities weak and USTs bid. Moreover, this has further fuelled speculation that the next move at the Fed will be a cut, with the OIS market now pricing...

Making the Best of the US-China Trade War

With the US-China trade dispute escalating further, we have returned to our previous analysis on export similarity to gauge the potential winners from a prolonged trade war. China’s exports are predominantly low-to-medium tech, which indicates a potentially high...

Things are looking up for US energy

US energy equities have been the worst performing sector on a trailing 12-month and 6-month basis (top-left chart), with most names falling below their 200-day moving averages. The top-right chart shows that historically whenever less than 5% of the constituents in...

Trading a Bear Market

This post was taken from our January 8th weekly report. We would characterise US equity indices today as being in a bear market. The official definition is a 20% decline from the recent high, close to close, but what does this mean in practice for investors? (The...

A Brief Bout of Market Optimism

This post was taken from our December 4th weekly report. We wrote last week about the absence of bottoming signals for the S&P. From a price perspective, there was little to suggest a sustainable rally was on the cards, as few of the usual signs of selling...

Dollar Funding Shortage set to Continue

The widening of the cross-currency basis (JPY, EUR and GBP, in particular) against the US dollar provides further evidence of a structural dollar-funding shortage, which is set to worsen as the Fed tightens. Although the spread typically widens towards year end, the...

Yield Curve: Forwards Hold some Clues

The 2s10s yield curve continues to grind incrementally lower, but negative carry is becoming a formidable headwind. One year carry on this part of the curve is a punitive 28bps. We are also seeing the forward yield curve struggling to flatten any more (top-left...