Ahead of Italy’s Referendum: Political Risk and Financial Fragility

Posted on 29. Nov, 2016 by Jean Jacques Ohana in Weekly Focus | 0 comments

Since the beginning of this year, the performance of Italian financial assets has spectacularly disappointed. Domestically oriented small-cap stocks (YTD: -21.5%) have underperformed their global (YTD: +13.2%) and European peers (YTD: -3.7%) by a wide margin (see Figure 1). In addition, on the bond market, the spread between Italian and purportedly safe German sovereign bonds [...]

Trump’s election outcome: financial discrimination of assets

Posted on 14. Nov, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Donald Trump’s election participates in a wave of anti-establishment, anti-globalization and nationalists platforms which roiled worldwide democracies since the financial crisis of 2008. It results from both physical and economic insecurity. In response, worldwide citizens demand more Government authority, less economic openness and more protection.

It is not by chance that the best performing currency since [...]

Trump: Brexit rewind

Posted on 09. Nov, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

novembre 9, 2016

After the UK Brexit vote, Donald Trump’s election has been a new victory for the anti-establishment wave which roils worldwide political regimes. This rise of protectionism portends a decrease in global trade and an increase in inflation.

 
 
In the short run, observations derived from market prices dynamics and quoted risk premiums enable us to [...]

Assessing the “Trump risk” in a looming contentious US election

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

Beyond Trump’s detailed economic platform, his election would represent, in the wake of the Brexit vote, a major setback for free trade and another victory for protectionism. A victory for Trump would raise concerns about the legitimacy of the Federal Reserve as Trump called into question the monetary policy carried out by Janet Yellen. Furthermore, [...]

What is the prevailing factor in the currencies market: dollar direction or carry trade?

Posted on 18. Oct, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

The currencies markets have experienced successive wild moves since 2010 (figure 1) due to the following events:

2010-2012: The Euro Zone Crisis weighs on the euro (EUR) exchange rate.

2012-2015: The Japanese yen (JPY) devalues following massive quantitative easing undertaken by the Bank of Japan.

2014-2015: The US dollar (USD) appreciates after the Federal Reserve starts to taper [...]

Deutsche Bank: What if…?

Posted on 28. Sep, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Over recent months, Deutsche Bank (DB) has been in dire straits. Its share price has plummeted (-52% year-to-date); its CDS have skyrocketed (see figures 1 and 2). At the beginning of this week, German politicians even intervened by assuring that a bailout would neither be needed nor granted (if needed). Like in the world of [...]

Europe: Running Out of Time?

Posted on 22. Sep, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

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 [...]