Since the beginning of the year, many credit markets have deteriorated in the high yield (EUR and USD) as well as in the investment grade space. As showed by figure 1, the tightening of credit spread is more acute in the US but is also present in Europe where it has reached the highest levels [...]
The Volkswagen cheating scandal caused tremendous fallout among the auto parts industry and the German stocks market. Since last Friday the auto parts sector fell 15% whereas the DAX underperformed all other European stocks indices.
As figure 1 shows, the CAC 40 has accumulated more than 9% of performance over the DAX 30 since the start [...]
Among a universe of 50 assets consisting of equities, sovereign bonds, corporate credit debt, emerging bonds, carry trade currencies, 75% present negative year-to-date performance.
In 2015, the best risk adjusted performing assets some European equities, the USD vs. EUR and surprisingly some sovereign bonds (US and Canada). Meanwhile, the worst risk adjusted performing assets include emerging [...]
The current deflationary cycle in US financial assets: how deep is this one and how long could it last?
Since mid-May 2015, all assets in dollar have tumbled simultaneously. Although the correction was mild until May 2015, it has considerably deepened since then. This correction presently takes place after equities, bonds and commodities in dollar, experienced a 5 years of uninterrupted growth from 2009 to 2014.
We propose to build a risk balanced portfolio in [...]
Riskelia’s “Risk Off” portfolio builds an allocation based on the Radar’s recommendations negatively correlated to global equities. As a matter of fact the correlation between the “Risk Off’ portfolio and global equities stands around -70% (figure 1). In addition to this negative correlation to equities, the “Risk Off” portfolio ensures positive returns in the long [...]
The financial turmoil of August results from a long lasting deteriorating outlook of commodities and emerging countries.
Riskelia’s heat map (figure 1) shows that the crisis epicenter has developed around commodities since September 2014. Commodities have dropped 16% YTD after a fall of 17% in 2014. The fall spared no commodity and amounts to 50% on [...]
As commodities slump is deepening (figure 1), the simultaneous drop of US breakeven inflation rates and surge of US 10 years real rates (figure 2) resulted in significant inflation-linked bonds underperformance.
US Investment Grade and US inflation linked bonds have significantly underperformed US treasuries onwards, highlighting defiance towards risky bonds and a quest for safety among [...]
Financial reflation translates the simultaneous rise of all financial assets held by investors. A portfolio consisting in 70% sovereign bonds and 30% equities is close to the market portfolio held by financial investors.
We can build for each country a diversified portfolio consisting of 30% of domestic future equities index and 70% of domestic sovereign bond [...]
After the currency peg was suddenly given up by the Swiss National Bank, the Swiss Franc became by far the most overvalued currency among G10 currency as illustrated by the deviation from Purchasing Power Parity valuation presented in figure 1.Over the last 25 years, the Swiss Franc has presently a record positive deviation of more [...]
July 28, 2015
The purpose of this study is to run smart beta portfolios on European Stoxx 600 Sectors (EUR) and compare them to a market weighted stocks index (Stoxx 600 Europe).
All sectors are dividend-reinvested. We consider the following smart beta portfolios:
Minimum Variance (using shrinkage methods on the covariance matrix to improve conditioning, limit portfolio concentration [...]