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

Posted on 20. Jul, 2016 by Jean Jacques Ohana in Weekly Focus | 0 comments

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 [...]

The stake of the Fed’s monetary policy: Emerging vs. Euro Zone & Japan

Posted on 08. Jun, 2016 by Jean Jacques Ohana in Weekly Focus | Comments Off

Almost all short term interest rates in the developed world are stuck to the 0% floor with some of them in negative territory (Switzerland, Euro Zone, Japan). The Central Banks’ leeway to ease further their monetary policies has considerably narrowed. Thus, the only monetary variable of adjustment left is the dollar, and its direction is [...]

Can equities overcome their problem, absent nominal growth?

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

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 [...]