Tag Archive: developed markets

DM Equity Allocation Model For Q1 2020

Developed equity markets remain near the highs despite mounting concerns about the impact of the coronavirus. MSCI World made a new all-time high last week near 2435 and is up 2.5% YTD. Our 1-rated grouping (outperformers) for Q1 2020 consists of Ireland, Israel, New Zealand, Spain, and Switzerland.

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Drivers for the Week Ahead

We get the first February data from the US manufacturing sector this week; the US economy remains strong; FOMC minutes will be released Wednesday. Canada reports some key data this week. Preliminary eurozone February PMI readings will be reported Friday; UK has a busy data week.

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Drivers for the Week Ahead

Risk-off sentiment intensified last week; the dollar continues to climb. This is another big data week for the US; the US economy remains strong. Fed Chair Powell testifies before the House Tuesday and the Senate Wednesday; the Senate holds confirmation hearings for Fed nominees Shelton and Waller Thursday.

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Some Thoughts on the Latest Treasury FX Report

The US Treasury’s latest “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” report no longer considers China a currency manipulator. The underlying message is that the Trump administration will continue to use an ad hoc “carrot and stick” approach to improve US access to the domestic markets of its major trading partners.

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Hard Brexit Redux?

The risks of a hard Brexit are perhaps higher than markets appreciated. Here, we set forth some possible scenarios as to what may unfold after the January 31 deadline. Uncertainty is likely to be protracted and markets hate uncertainty. As such, we see UK assets continuing to underperform.

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Drivers for the Week Ahead

The dollar was surprisingly resilient last week; we look for further dollar gains ahead. It is a holiday shortened week in the US, but there are still some major data releases. There is a fair amount of eurozone data this week; UK Prime Minister Johnson unveiled his Tory manifesto. Hong Kong held local elections this weekend; tensions between Japan and Korea appear to have eased, but questions remain.

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DM Equity Allocation Model For Q4 2019

Global equity markets continue to power higher US-China trade tensions have eased. MSCI World made a new all-time high today near 2290 and is up 23% YTD. Our 1-rated grouping (outperformers) for Q4 2019 consists of Ireland, Sweden, Israel, Denmark, and Australia. Our 5-rated grouping (underperformers) for Q4 2019 consists of the UK, Hong Kong, Greece, Germany, and Portugal.

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FOMC Preview

The FOMC begins a two-day meeting today with the decision due out tomorrow afternoon.  The Fed is widely expected to cut rates 25 bp for the third meeting in a row.  What’s next? US data have undeniably softened in September.  Weakness in the manufacturing sector appears to have spread to the wider economy.  ISM PMI, jobs, CPI, PPI, and retail sales all came in weaker than expected. 

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A New Stage of the US-China Conflict

The US-China diplomatic relationship may be entering a new stage. The balance of power between the key players – Trump, China, the US Congress, and the Democrats – is changing and their roles are being reshuffled. This might be enough to break the endless cycle of agreements and re-escalations. In short, we think both Trump and Chinese officials have a greater incentive to reach a deal (or at least not to escalate) this time around.

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Drivers for the Week Ahead

The dollar rally has been derailed by weak US data and rising recession fears. The September jobs data was not a game-changer and so we are left waiting for more clues. Believe it or not, the US economy remains solid; however, the US repo market has not fully normalized yet. The Chinese trade delegation arrives in Washington Thursday for two days of trade talks.

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Musings on the Repo Market, Fed Policy, and the US Economy

The US repo market appears to finally be normalizing. The low pace of normalization is concerning and so a more permanent solution may be needed to head off similar problems at year-end. We do not think this issue has any implications for the economic outlook, which we continue to view as solid.

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Drivers for the Week Ahead

We continue to think that the US economy is in better shape than most appreciate, and that underpins our strong dollar call. Tensions are likely to remain high after reports emerged last week that the US will look into limiting capital flows into China. US September jobs data Friday will be the data highlight of the week; there is a heavy slate of Fed speakers this week.

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Some Thoughts on the Fed and Oil Shocks

Oil prices have spiked after the weekend attack on Saudi oil facilities.  Will it impact the Fed tomorrow?  No.  We compare the current (but still unfolding) situation to past oil shocks from the 1970s and discuss the policy responses taken.  

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Latest Thoughts on the US Economic Outlook

The US economy is starting to show cracks from the ongoing trade war. While we do not want to make too much from one data point, we acknowledge that headwinds are building whilst US recession risks are rising.

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Drivers for the Week Ahead

We remain dollar bulls; this is an important data week for the US. Final August eurozone manufacturing PMIs will be reported Monday; UK reports August PMIs this week. RBA meets Tuesday and is expected to keep rates steady at 1.0%; BOC meets Wednesday and is expected to keep rates steady at 1.75%.

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DM Equity Allocation Model For Q3 2019

We recently introduced our Developed Markets (DM) Equity Allocation model. Building on the success of our EM model, this new framework extends our analysis to cover 24 DM equity markets. Our analysis is meant to assist global equity investors in assessing relative sovereign risk and optimal asset allocation across countries within the DM universe.

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Our March 2013 Analysis: “Volcker Moment Redux”: Upcoming Weakness of Emerging Markets

The 2010 QE2 is a reason why many emerging markets started to slow considerably in the course of 2012. We reckon that this weakness will continue. Bizarrely QE2 helped to reduce global imbalances.

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