Currencies

MacroQuant warns that US equities are pricing in very little economic risk. The model is shunning equities and recommends a large overweight to cash.

MacroQuant warns that US equities are pricing in very little economic risk. The model is shunning equities and recommends a large overweight to cash.

Global currency markets have entered a new era. This implies that the framework for analyzing exchange rates must also change. We introduce a new framework for analyzing EM currencies and classify them into resilient and vulnerable categories. Finally, we are adding more EM domestic bonds to our portfolio and making many changes to our currency trades.

This Insight looks at the implications of the RBNZ’s rate cut on New Zealand assets. 

Right now, the major stock and bond markets are more ‘anti-fragile’ than fragile, and the Joshi rule recession indicators signal that a US recession is not imminent. This justifies a neutral, or default, tactical weighting to both stocks and bonds until a major market does become fragile, or until recession risk elevates. The one major price trend that is fragile is the 65-day selloff in the US dollar, which justifies a tactical overweighting to the dollar.