Easing of financial conditions on emerging assets

Posted on 10. Jun, 2014 by Jean Jacques Ohana in Weekly Focus

We mentioned in April 2014 the strengthening of our indicators on emerging assets. The recovery was first spotted in Asia where Indian and Taiwanese stocks showed impressive positive dynamics at the beginning the year.

As showed in figure 1, emerging bonds in dollar are clearly leading the way up and MSCI emerging equities are following. Emerging [...]

Long Bonds and long Equities altogether

Posted on 10. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

As liquidity comes back to risk seeking territory (figure 3), equities are likely to rise again but surely less than in 2013.

Nevertheless, the uncertainties about the emerging countries’ outlook will weigh on financial markets and deteriorate the global economic outlook. As a matter of fact, Chinese authorities will maintain a tightening mode in liquidity so [...]

Why active risk balanced strategies make sense

Posted on 02. Dec, 2013 by Jean Jacques Ohana in Weekly Focus

Risk Parity strategy or more accurately risk balanced allocation is a methodology which consists in allocating risk to assets classes rather than capital.

An example is presented below for an unleveraged portfolio. A leverage (for example multiplying all allocations by a factor 2) may be used to match the performance of traditional asset allocation portfolios.

Risk allocation

Capital [...]

Low correlation and poor diversification: how is it possible?

Posted on 02. Sep, 2013 by Jean Jacques Ohana in Weekly Focus

As showed by Riskelia’s financial market integration (figure 1), the interdependence of financial markets has significantly receded. Therefore, the whole markets moves are less correlated and less driven by the so-called “risk on / risk off” factor (combining positive positions on risky assets and negative exposure on bonds). Riskelia’s financial market integration is very similar [...]

Increased diversification and de-risking of the EURUSD parity

Posted on 12. Mar, 2012 by Steve Ohana in Weekly Focus

As reflected in figures 1 and 2, the global integration factor has subsided on several parts of the financial system. The global integration factor corresponds to the proportion of global asset prices variance explained by the first common risk factor. This decrease in integration translates better diversification prospects within the financial system. Besides, we can [...]

The resurrection of the short yen

Posted on 24. Feb, 2012 by Riskelia in Weekly Focus

As a result of central banks’ addictive monetary policies, moral hazard is at a peak and financial liquidity has become the main driver of financial markets. The latter is well-characterized by Riskelia’s indicator of risk aversion, which reflects the average dynamics of costs of risks across different asset classes (credit spreads, Ted spread, banks’ CDS, [...]

The advent of “muddle-through” assets

Posted on 31. Jan, 2012 by Riskelia in Weekly Focus

The month of January is marked by a complete shift in themes across cyclical assets:

Sectors performance rotated from defensive sectors (Food & Beverage, Health Care) to cyclical and banking sectors (Banks, Insurance, Automobiles & Parts, Basic Resources)
Emerging equities have started to emerge as performance leaders
The most cyclical commodities (cyclical precious, base metals) have clearly outperformed [...]

2011, a year without trends? Not so sure…

Posted on 04. Jan, 2012 by Riskelia in Weekly Focus

Record of 2011’s successful and aborted trends

As showed in figure 1, the 19% return of our “best-of” portfolio in 2011 has been made mostly in the three months of July, August and September, with more than half of the performance generated in the sole month of August. This asymmetric behavior is characteristic of trend-following strategies: [...]

Does the oil complex get bullish?

Posted on 23. Nov, 2011 by Riskelia in Weekly Focus

One of the main differences between the present state of financial markets and the 2008 situation is the supportive oil supply / demand outlook. In 2008, the global commodities one year curve sharply shifted to record contango whereas it is hardly positive today. The commodities curve reflects the inventory level. Whereas a trend towards backwardation [...]

Cyclical assets signals: are we heading to recession?

Posted on 06. Sep, 2011 by Riskelia in Weekly Focus

Financial markets can provide good signals on the global economic outlook. Indeed, in a financial 1crisis such as the one we went through in August, some assets may reflect banks funding contraction and a credit crunch earlier than economic indicators. As Georges Soros put it, financial markets and the real sphere have a reflexive interaction, [...]