Are emerging markets re-emerging?

Posted on 09. fév, 2012 by Christophe Lerolle in Weekly Focus | Commentaires fermés

As global liquidity has consistently improved since the start of the year 2012, the emerging markets recovery is overwhelming. As showed in figure 1, the leader is emerging bonds which exhibited a positive trend during the whole 2011 financial crisis. This leader has been caught up by emerging equities and more recently by emerging currencies.

As [...]

The advent of “muddle-through” assets

Posted on 31. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

The month of January is marked by a complete shift in themes across cyclical assets:

Sectors performance rotated from defensive sectors (Food & Beverage, Health Care) to cyclical and banking sectors (Banks, Insurance, Automobiles & Parts, Basic Resources)
Emerging equities have started to emerge as performance leaders
The most cyclical commodities (cyclical precious, base metals) have clearly outperformed [...]

Are safe havens still safe?

Posted on 27. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

The risky assets revival may be good news for markets as a whole… certainly not for safe haven sovereign bonds…
In figure 1, we have represented a bond total return index since 2000 (composed of Gilt, T Notes of different maturities, Bund, Bobl, Schatz) together with the average bond bubble on the same basket of sovereign [...]

How do you spell Quantitative Easing in German? « LTRO »

Posted on 17. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

As the recent S&P’s downgrade puts back the sovereign debt issue on the front stage, the liquidity conditions have significantly improved as shown by three different indicators:

The Radar’s trend is flipping to the positive side on dollar and sterling short term interest rates futures. The reason is not that central banks will further decrease their [...]

Divergent cyclical assets… until when?

Posted on 11. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

We have been observing since December 2011 a set of important disconnections among cyclical assets:

The cost of risk in equities markets shows signs of easing while the strain on banks’ funding remains unchanged (Figure 1)
Emerging and European currencies are in negative spirals against the US dollar while oil products display strongly positive trends (Figure 2)
Some [...]

2011, a year without trends? Not so sure…

Posted on 04. jan, 2012 by Riskelia in Weekly Focus | Commentaires fermés

Record of 2011’s successful and aborted trends

As showed in figure 1, the 19% return of our « best-of » portfolio in 2011 has been made mostly in the three months of July, August and September, with more than half of the performance generated in the sole month of August. This asymmetric behavior is characteristic of trend-following strategies: [...]

Playing the euro devaluation

Posted on 27. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

The bullish dollar theme is undeniably linked to the « risk off » mode. As illustrated by figures 1 to 3, the explanatory factors of the G10 Currencies vs. USD theme comprise always equities factors, commodities themes, worldwide inflation bonds and short term interest rates differentials. Among the different parities vs. the dollar, the AUD is most [...]

Is dollar more precious than gold?

Posted on 20. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

For the first time since the August 2008 deleveraging, the gold trend has gone below 10%. The recommendation is still in positive territory but it is about to go negative as showed in figure 1. Even more worrying, we come from a situation where the bubble was nearing 80%, reflecting extreme herding behavior and high [...]

Is defensive investment the best attack?

Posted on 13. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

As most investors focus on high profile and volatile assets such as geographical benchmark equities, commodities and high yield, all our indicators point towards defensive investments:

Inflation bonds
Emerging bonds
Gold
Defensive equities (low beta) such as consumer staples and health care sectors

Among the Radar’s 30 top positive bets, six belong to a ‘defensive category’, which can be defined [...]

The euro devaluation process has started

Posted on 06. déc, 2011 by Riskelia in Weekly Focus | Commentaires fermés

It is often said that the EURUSD is a « risk on » asset. When looking for assets that are the most explanatory of EUR/USD returns, we find in decreasing order the World Inflation Bonds, the Crude Oil WTI and the spread Euribor vs. Eurodollar (figure 1).

The first two factors represent monetary effects characterizing the well-established inverse [...]

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