Decoding Financial Markets in 10 Charts

Posted on 10. Apr, 2018 by Jean Jacques Ohana in Weekly Focus | 0 comments

By Jean-Jacques Ohana, CFA and Dr. Christian Witt, 10th April 2018
In a context of monetary tightening, global market liquidity has considerably deteriorated. This is potentially troublesome after investor complacency has driven worldwide equities to elevated valuations. We accordingly adopt a defensive positioning.

1. Global market liquidity has considerably tightened after 18 months of abundancy.
Risk Aversion Indicator [...]

How to assess modified duration of equities’ investment styles?

Posted on 21. Dec, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

By Jean-Jacques Ohana, CFA and Dr. Christian Witt, 18th December 2017.

The dependency of an equity portfolio to sovereign bonds is an important issue for investors in several ways. One is to use the bond sensitivity of equities to explain excess return coming from bond duration. Another one is to play the direction of interest rates [...]

German Bunds: Short of a Lifetime?

Posted on 25. Oct, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

By Jean-Jacques Ohana, CFA and Dr. Christian Witt. October 25, 2017
On April 21, 2015, legendary bond investor Bill Gross announced via Twitter that German 10-year Bunds constituted “The short of a lifetime. (…) Only question is Timing / ECB QE.” And his timing could have been barely better. Over the next two months, German [...]

Does Hidden Labor Market Weakness Warn of a Volatility Spike?

Posted on 18. Oct, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

October 18, 2017, Jean-Jacques Ohana, CFA and Dr. Christian Witt (both YCAP Asset Management)

Stock market volatility typically jumps during US economic recessions (see Figure 1). Recessions in turn tend to occur when the labor market is weak (see Figure 2). Accordingly, the current investment outlook looks rosy when focusing on headline labor market data. But [...]

Has the Dollar Turned into a « Risk-On » Currency?

Posted on 10. Oct, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

October 9, 2017

The dollar is usually perceived as a safe-haven currency for several reasons. Over the last 10 years, the greenback was indeed bought when equities fell the most. This behavior has been all the more pronounced as the Eurozone gradually turned into the epicenter of financial turmoil since 2010. Let’s not forget that the [...]

The ‘Sintra Deleveraging’

Posted on 18. Jul, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

July 18, 2017, Jean-Jacques Ohana, CFA and Dr. Christian Witt (both YCAP Asset Management)
Global sovereign yields suddenly spiked on June 26, 2017, when rumors spread that central bankers from around the world were discussing monetary tightening during a conference held in Sintra, a small Portuguese town. Since then, US and German sovereign yields jumped by [...]

Turbulence Distance vs. Risk Aversion: And the Winner is…

Posted on 20. Jun, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

June 20, 2017

In 2010, a paper published by the Financial Analysts Journal proposed a measure of financial turbulence based on the Mahalanobis Distance. The latter measures the daily surprise move of all financial assets compared to historical volatilities and correlations.
The Mahalanobis Distance is expressed as followed:

R is the vector of daily returns for each asset, [...]

Do Investors Overestimate the Benefits of Diversification?

Posted on 14. Jun, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

June 14, 2017, Jean-Jacques Ohana, CFA and Dr. Christian Witt (both YCAP Asset Management)

We have witnessed a strong divergence among US sectors over the last 10 years. The S&P 500 Technology sector has almost doubled whereas the S&P 500 Energy has stalled over the same period (see Figure 1). This divergence reveals the impressive winning [...]

The China Anomaly

Posted on 02. Jun, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

June 2, 2017, Jean-Jacques Ohana and Dr. Christian Witt (both YCAP Asset Management)

Over the last month, a very rare performance anomaly has developed on the Chinese equity market. The 50 largest (A-share) stocks included in the Shanghai SE Composite Index (SSE), China’s primary stock exchange, have considerably outperformed the broader benchmark index (see Figure 1). [...]

Are Developed Markets a Concentrated Bet on US Tech Stocks?

Posted on 24. May, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

May 24, 2017, Jean-Jacques Ohana and Dr. Christian Witt (both YCAP Asset Management)

Developed markets, not their emerging peers, have been the primary source of equity returns over the last five years (see Figure 1). The MSCI World, a proxy for the performance of global developed equity markets, accumulated nearly +80% of performance, easily surpassing the [...]