Europe: Running Out of Time?

Posted on 22. Sep, 2016 by Jean Jacques Ohana in Weekly Focus | 0 comments

September 22, 2016, by Dr. Christian Witt

Since the onset of the 2007-08 global financial crisis, the European Union (EU) has continuously lurched from one crisis to the next – unfortunately without definitely resolving any of them. This “kicking-the-can-down-the-road” behavior has left a mounting number of unresolved issues behind: Refugee crisis, Italian economic malaise, ailing European [...]

Deleveraging: Has it further to go?

Posted on 13. Sep, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

September 13, 2016

On Thursday 8th September and Friday 9th September, financial markets suffered a strong simultaneous decline across asset classes driven by a rise in interest rates. As shown in figure 1, bonds dropped by more than -2.0 standard deviations over the period while equity markets fell between -1.5 and -2.0 standard deviations.

When the dust [...]

Why Do Stocks in Emerging Asia Outperform?

Posted on 06. Sep, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Since mid-February 2016, when a vicious rout in global equity markets eventually came to a halt, stocks in emerging Asia have outperformed those in the rest of the world by a wide margin (see figure 1). Why?

To answer this question we first try to learn more about the index composition. So we break down the [...]

Insight from the US curve: the Fed does not have much room for maneuver to tighten

Posted on 31. Aug, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

August 31, 2016

In the wake of the Jackson Hole meeting, it seems that the Federal Reserve (Fed) has sought to convince investors that further rate hikes are imminent. In fact, FOMC chairwoman Janet Yellen said that “the case for rate hike has strengthened in recent months“. Fed Vice President Stanley Fischer was even more hawkish [...]

Deciphering the European banking crisis

Posted on 02. Aug, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Euro zone banks have lost more than 33% of their equity value since the start of the year 2016. As shown in figure 1, the loss of equity for investors over the last 10 years amounted to a staggering 77% even after accounting for the distribution of dividends. In the same period, the Euro Stoxx [...]

Equity-Bond-Gold rising simultaneously: deciphering the conundrum

Posted on 27. Jul, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Ever since the Brexit referendum on June 23, 2016, capital markets seem to go crazy as equities, bonds and precious metals all soar at the same time (figure 1). This has baffled many investors because such an exceptional situation should not last long. The features of each of the three asset classes are just too [...]

The key for risky assets outlook: the value theme in USD

Posted on 20. Jul, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Going forward, a USD Value theme is likely to dominate the evolution of risk assets.
This conclusion is based on a visual analysis of cross-market correlations using a “Minimum Spanning Tree” shown in figure 1. Two “risk on” branches, or investment themes, stand out and thus merit closer inspection:

The first “risk on” branch consists of USD-denominated [...]

Brexit aftermath: interest rates fall off a cliff and risky assets hold on… except in the euro zone

Posted on 06. Jul, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Two weeks into the post-Brexit world, it is about time to draw first conclusions on its impact on financial markets. The most noticeable observation is a global slump of rates. As a matter of fact, since the Brexit vote on 23rd June, 10-year government yields fell more than 40 bps in safe have countries. Astonishingly, [...]

Brexit: “Europe caught a cold from the ice inside its soul”

Posted on 29. Jun, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

The Brexit vote has more political significance than a definite financial impact.

It is the first time since the fall of the Berlin Wall that the trend of globalization and free trade has receded. Dani Rodrik, the Turkish economist and professor of politics and writer of The Globalization Paradox has defined in 2011 an incompatibility trilemma [...]

Brexit or Bremain? Prepare for the worst and hope for the best

Posted on 17. Jun, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

The Brexit dynamics is gaining traction in the UK opinion since early June. This objective fact is reflected in the polls which have turned in favor of the leave camp since the debate between Prime Minister David Cameron and the UKIP leader Niger Farage (see wikipedia: Opinion polling for the UK European Union membership referendum [...]