Can equities overcome their problem, absent nominal growth?

Posted on 24. May, 2016 by Jean Jacques Ohana in Weekly Focus | 0 comments

Over the last 10 years, most of equities indices have actually displayed negative growth of earnings. Apart from US and Japan, all countries indices have experienced negative growth since 2006 as reflected in figure 1. Despite the lackluster growth of earnings, increase of prices has largely exceeded earnings as showed in figure 2. Except Japanese [...]

Why asset allocation gets easier? Better diversification from fixed income

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

Even though performance of equities has been lackluster since the start of the year 2016, several investment themes have emerged and offer diversification:

Outperformance of all fixed income markets with a positive contagion spreading from sovereign debt to investment grade corporate debt, emerging bonds and high yield corporate debt.

Rebound of commodities markets, notably Gold (+20% year [...]

Time to invest in US Value Stocks

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

 
The Equities Value Theme is represented by stocks presenting attractive valuation features, notably low Price to Book or high Dividend Yields or low Price to Earnings ratio. Each stock is ranked according to one value metric (i.e. Price to Book) and two growth variables (i.e. earnings medium term growth and sales growth) and then the [...]

US Equities Minimum Variance approach: the sectoral bias

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

 
We had proposed a minimum variance model applied on sectors on two different occasions (in April 2014 and in July 2015) thus shedding light on the sectoral bias present in the minimum variance approach.

As US Minimum Variance Equities dominate other investment styles since the start of the year 2016, we suggest to extend this analysis [...]

Japanese and euro zone stocks behave in the same way… down

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

Japanese and euro zone equities have three main common features.

Both markets have built their past years glory upon the monetary stimulus of their domestic Central Banks, notably the BOJ and the ECB. The successive quantitative easing of the BOJ and the ECB weakened the JPY and the EUR effective exchange rate until 2015 but since [...]

The Fed is dovish, financial reflation is back

Posted on 30. Mar, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Janel Yellen eventually endorses a dovish position, the same stance which was adopted on 16th March 2016 in the last FOMC. She said:

“I consider it appropriate for the committee to proceed cautiously in adjusting policy (…) This caution is especially warranted because, with the federal funds rate so low, the FOMC’s ability to use conventional [...]

Normalization of credit markets

Posted on 15. Mar, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Since mid-February, risky debts, notably corporate credit and emerging bonds, have considerably improved and even led the rebound in risky assets. This broad based improvement may be a turning point in the deflationary cycle which has prevailed in global financial assets since May 2015.

As a matter of fact, credit used to lead global equities lower [...]

Defiance towards money fosters the rebirth of Gold

Posted on 03. Mar, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Negative yields have generalized in developed countries as 10 years yields are presently near 0% or even below in Germany, Japan and Switzerland (figure 1). Nearly 7 trillion dollars of Government bonds present negative yields, which makes up 29% of all debt issued by developed countries.

Negative yields in Government bonds convey the idea that Governments [...]

Can Central Banks deliver what financial markets expect from them?

Posted on 24. Feb, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

 
Since the start of the year 2016, some encouraging sign of financial reflation has built around the fall of interest rates. As showed in figure 1, the simultaneous drop of all financial assets has been temporarily stopped in 2016 illustrated by the recent rise of a risk balanced portfolio.

Meanwhile, the decline of 50 bps [...]

Light at the end of the tunnel of financial deflation

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

 
It is a paradox that when inflation expectations stand at their lowest level ever reached in the US and in euro zone (figure 1), some rewarding dynamics have materialized on various assets classes: sovereign bonds since the start of the year 2016 (US T Notes +5% year to date, Gold +12% year to date, Gold [...]