Policy driven financial markets: why 2013 may be far different from 2012

Posted on 31. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The anatomy of financial market returns shows that all assets apart from base metals rose in 2012 (Figure 1).

Despite the unprecedented liquidity provided by Central Banks, the performance was however highly contrasted across the different assets. The risky bonds stand out remarkably with Sharpe ratios above 3 for emerging debt, high yield corporates, investment grade [...]

Another S&P 500 flash crash: how excess liquidity kills the financial system

Posted on 24. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

Last Thursday, the S&P 500 Futures price fell by 3.23% in just 15 minutes following the decision of Republican House Speaker John Boehner to call off a confidence vote on a compromise on the fiscal cliff. The S&P 500 recovered subsequently 2% and ended the day only 1% lower.

The event was singularly followed by declines [...]

US Treasuries buyers are not the fools they look like

Posted on 17. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

Judging from Riskelia’s score, purchasing US T Notes is a promising bet (figure 1). At 1.70% nominal yield, this investment may look foolish. However, looking closer at the dynamics of the real yield (the difference between nominal yield and year on year change in inflation), we can see that the real yield is far from [...]

Why Quantitative Easing alone won’t make commodities rise

Posted on 10. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The performance of risky assets since 2011 has been highly contrasted (figure 1). The Iboxx High Yield provided by far the highest risk-adjusted return. Whereas equities and precious metals have ended close to neutrality over the last two years, there has been a rift between the positive total return performance of Agriculture and Oil on [...]

How long will the emerging rift last?

Posted on 03. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The financial markets integration, which dynamically represents the strength of the relationships between markets, has clearly subsided (figure 1). This is a positive sign for global market stability as less integration implies a greater focus on underlying market fundamentals and greater diversification possibilities.

The diversification is also present at the trend level, as closely related markets [...]