Financial and Political Uncertainty in Perspective

Posted on 16. Feb, 2017 by Jean Jacques Ohana in Weekly Focus | 0 comments

February 16, 2017, by Dr. Christian Witt (YCAP Asset Management)

The world seems to be flooded with political uncertainty. From Brexit worries to Trump (Goldman’s worries, Weird Conduct, Reichstag Moment), the rise of populism in Europe (Bershidsky, Walesa) or the upcoming Chinese Communist Party’s National Congress. Yet, financial markets do not seem to bother. How so?

To [...]

Italy in Peril?

Posted on 02. Feb, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

February 2, 2017, by Dr. Christian Witt (YCAP Asset Management)

Dear reader,

As you may have certainly noted, Italy has been very much in our focus recently (European Reflation, Italian referendum, Europe: Running Out of Time?). This is neither to annoy nor to bore you, but an expression of our growing concerns about the diverging economic forces [...]

European Reflation: Boon or Bane?

Posted on 16. Jan, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

January 16, 2017, by Dr. Christian Witt (YCAP Asset Management)

In economic terms, the New Year has started with a bang in Europe: some inflation is back! What is more, inflation has vastly beaten expectations in most major Euro Area economies (see Table 1). True, some of the increase is due to a base effect as [...]

Why Do European Equities Soar Since the US Presidential Election?

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

December 14, 2016, by Dr. Christian Witt (YCAP Asset Management)

Ever since Donald Trump has been elected as the new President of the United States on November 8, 2016, European equity markets have soared (+5.9%). European Equities? This sounds odd given that Trump ran on a distinctly protectionist platform. Europe, with its chronic economic weakness and [...]

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

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

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 [...]