Elections Come and Go

The US presidential election on Tuesday is currently the number one event risk for US equities.  But investors should focus on two more important underlying themes: positioning and reflation. Markets haven’t whole-heartedly embraced the reflation trade as money...

Markets Vulnerable to Shock of Higher Food Prices

The sharp slide in agricultural commodity prices this year has squeezed long trades, with net non-commercial futures positioning in corn now close to neutral (bottom-left chart). Corn has suffered the most precipitous drop, with high planting rates driving futures...

The Yield Curve and Volatility

Falling liquidity was one of the principal reasons behind our call for a flatter US yield curve this year. Excess liquidity often drops towards the end of an expansion. At the same time the relative demand for credit falls, while the central bank is reacting to...

Dollar Very Stretched to the Downside

The DXY index has fallen in a straight line this year, with the Sharpe ratio of the YTD move at almost 2.4. Although we have been bearish on the dollar from a macro point of view since last year, the dollar does look vulnerable at present to a short squeeze. The top...

Rare Buy Signal on Gold; Potential Short-covering Rally

Over the past three weeks we have had two rare buy signals on gold. Previous buy signals have returned 5-10% over the next month. The signal is a measure of selling or buying exhaustion.  The returns are very good, and while not every single signal works, the odds are...