Monthly Archives: February 2014

Outlook & Review 24 February 2014

photo (7)Markets broadly rose last week, but remain technically weak, showing signs that the rebound has topped until we get clearer news on the economic impacts of: 1) the weather in the US (and parts of Europe for that matter); and 2) the tightening of financial conditions in Emerging Markets. On that front, this is a rather data-lite week. But there are some important events to keep an eye on. Continue reading

Monetary Policy Normalisation? Back to the New Normal

photo (7)Over recent days and weeks, the FOMC has dramatically shifted its policy stance vis-a-vis its posture of 2013. No more of that shying away stimulated by market panics – so called Taper Tantrums. This time, as the EMs reel from QE withdrawal, the FOMC members are lining up to pledge allegiance to the cause of returning to so-called normal policies.

In part, this is surprising because the data are far from impressive, and whilst one month of bad weather might count as a “pothole” in the words of Goldman Sachs economists, two months is starting to look like a bigger hole, a more substantial threat to momentum. Continue reading

EM & the US Sell-Off

cnbc 18052009I spent the night pondering this sell-off. It seems so much like smoke and mirrors. Finally, I could only find one explanatory variable: the market is pricing a collapse in global GDP brought about by EM sufferance.

To my delight, GS indirectly took on this concern in a research note today. “Only a Pothole for US Growth.” Here are three sentences from that note, which amply highlight the EM factor on US markets: Continue reading

Outlook & Review 3 February 2013

cropped-photo-71.jpgEquities had another choppy week last week, with positive moves never looking convincing, and the momentum remaining to the down-side. The S&P 500 lost 0.43% on the week, whilst the Dow lost 1.14%, the Nikkei 225 2.58%, and the Shanghai Composite 0.45%. US treasury yields continued to decline, whilst EM assets and currencies continued to suffer. Oil continued to defy gravity somewhat.
Two clear stories depicted the week, the continuation of tapering by the FOMC, and the ongoing pain in Emerging Markets. From an asset allocation perspective, the interesting shift in 2014 is that US treasury yields are tightening in the face of tapering, whilst EM assets are getting punished. This is in contrast to spring 2013, when taper shocks caused both US bonds and EM assets to give ground. In this sense, the US market is enjoying a classical correction. EMs are doing something different. Continue reading