What Drives the Emerging Currency Rally?

Posted on 23. Mar, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

March 23, 2017, Jean-Jacques Ohana, CFA and Dr. Christian Witt (both YCAP Asset Management)

Against all odds––most notably fears of protectionism––emerging currencies (against the USD) were among the biggest winners at the start of 2017 (see Figure 1). What a change of fortune! No other currency illustrates this trend reversal better than the Mexican Peso (MXN). [...]

Up or Down? That is the Euro/Dollar Question

Posted on 13. Mar, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

March 13, 2017, Dr. Christian Witt (YCAP Asset Management)

Some months ago, markets seemed convinced the USD would continue to appreciate against the EUR. The dollar’s parity with the common currency appeared to be just a moment away. Against all such speculations, the EUR held steady above a key technical resistance level (see Figure 1) and [...]

Little to Lose, Much to Gain!

Posted on 22. Feb, 2017 by Jean Jacques Ohana in Weekly Focus | Comments Off

February 22, 2017, by Jean-Jacques Ohana, CFA and Dr. Christian Witt (YCAP Asset Management)

Gold is frequently mentioned as the number one asset for hedging political risks. Given the highly elevated global political risks today––by one measure the highest in two decades (see Figure 1)––it seems about time to revisit this hypothesis taking into account historical [...]

Financial and Political Uncertainty in Perspective

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

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 [...]