October 21, 2014
Since October, worldwide equities have experienced a severe correction. The peak-to-valley of the MSCI World All Countries in September is close to 10%. The MSCI World All Countries index posted negative returns for the 4th consecutive week in a row since 19th September 2014: -2%, -2%, -2.7%, -0.9%.
The four weeks correction barely reached [...]
Among the signals of the Radar (figure 1), two of them deserve a particular attention:
The short EUR/long USD position, although in a more mature stage, remains attractive because of its low correlation with the other asset classes (close to 0). During the euro financial crisis (2010-2012), the USD/EUR used to be negatively correlated to equities [...]
In September we witnessed a worrisome joint financial triptych (figure 1):
The positive dollar trend vs. every currency (see figure 2). The dollar index is up 3.5% in September with sharp negative performance of commodity currencies (AUD, NZD, CAD). The dollar upside has clearly benefitted Japan but has undermined emerging countries which rely upon cheap dollar [...]
Since June 2014, all commodities have retreated. As showed in figure 1, agriculture commodities led the fall, followed by oil and precious metals. In September, commodity currencies were carried along by the wave of commodities slump. In particular, AUD/USD is down 4.5% in September. Only, commodities-related equities and base metals are spared so far.
Real Estate, [...]
Last week saw another financial experiment of Federal Reserve tightening. Some leaks about the drop of forward guidance from the next FOMC statement were probably orchestrated by the hawks among the Federal Reserve Board of governors. First, the San Francisco Fed issued a paper where they show that surveys, market expectations, and model estimates expect [...]
Over the two recent weeks, Draghi has revolutionized the traditionally hawkish monetary policy in the euro zone.
In his Jackson Hole speech, on August 22, he first emphasized the lack of demand in the Eurozone calling into question the excessively contractionary fiscal policy. Then, in the following ECB meeting on September 4, he surprised the consensus [...]
September 2, 2014
The G10 world is heavily indebted. As a matter of fact, the debt/GDP ratio has risen since 2007 in every G7 country except Germany (figure 1). Austerity, allegedly the solution to the debt problem, did not reduce the debt burden. On the contrary, budget consolidation worsened the economy more than it improved the [...]
Hedge Funds are supposed to generate uncorrelated returns with the main asset classes (Equities, Bonds and Commodities). The HFRX Global Hedge Funds Index, though a not perfect benchmark of the hedge funds industry, helps shedding some light on the behavior of global hedge funds over the last 10 years (figure 1).
It cannot be denied that [...]
The year 2014 was supposed to be the year of global rates increases and continued over performance of developed over emerging equities markets.
Actually, the exact opposite happened in 2014, as anticipated in our research.
Interest rates did not rise (Are you so sure that interest rates will rise in 2014?) and even sharply fell further, mainly [...]
Equities’ performances have been sharply contrasted since the beginning of July: while the Euro Stoxx is down by more than 7%, the Shanghai Composite Index has gained almost 8%.
From a short-term perspective, this may look like a divergence of equities’ performances. However, when zooming out a bit, we realize that this looks more like a [...]