Highlights
All of our recent investment recommendations have performed very strongly but have further to go:
1. Own a combination of European banks plus U.S. T-bonds.
2. Overweight EM versus DM.
3. Overweight European versus U.S. equities.
4. Overweight Italian assets versus European assets.
5. Overweight the JPY.
Feature
Chart of the Week
Bank Outperformance Corroborates A Growth Rebound
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2019 will be the investment mirror-image of 2018. Last year started with growth fading and inflation on the cusp of picking up, both in Europe and around the world. This year has started with the European and global economies in the mirror-image configuration: growth likely to rebound, albeit modestly, and inflation set to fade (Chart I-2).
Chart I-2
Why 2019 Is The Mirror-Image Of 2018
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However, as 2019 unfolds, the configuration will reverse, requiring a flip from a pro-cyclical to a pro-defensive investment tilt later in the year. This contrasts with 2018 which started pro-defensive and ended pro-cyclical. In this regard, the economic and investment shape of 2019 will be the mirror-image of 2018.
Growth To Rebound, Inflation To Fade
A tell-tale sign of a growth rebound is the recent outperformance of banks. Around the world, yield curves have flattened – or even inverted – meaning that banks’ net interest margins have compressed. This compression of bank profit margins is normally bad news for bank equities. Yet banks have been outperforming, not just in Europe but globally (Chart I-3). If margins are compressing, the plausible explanation for outperformance would be an improved outlook for asset growth, reflecting both a reduction in bad debt provisioning and a pick-up in bank credit growth.
Chart I-3
Banks Have Been Outperforming Since October
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Independently and reassuringly, our proprietary credit impulse analysis supports this thesis (Chart of the Week). Six-month credit impulses have been rebounding not only in Europe, but also in the United States and very impressively in China (Chart I-4).
Chart I-4
6-Month Credit Impulses Have Rebounded Everywhere
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At the same time, inflation is set to disappoint as the recent near-halving of the crude oil price feeds into both headline and core consumer price indexes. With central banks now promising even greater “dependence on the incoming data”, this unfolding dynamic will force them to temper any hawkish intentions and rhetoric, limiting the extent of upside in bond yields.
In this configuration, the combination of European banks plus U.S. T-bonds which we first recommended in November is still appropriate (Chart I-5). The position is up 3 percent in little more than a month and has further to go.1
Chart I-5
Own A Combination Of Banks And Bonds
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Europe’s largest economy, Germany, should benefit from another support to growth. Last year, the auto sector – a major engine of the German economy – spluttered as it absorbed the new WLTP emissions testing standard. Through the middle of 2018 German motor vehicle exports suffered a €20 billion hit which shaved 0.6 percent from Germany’s €3.4 trillion economy (Chart I-6). Now, if auto exports stabilize, this drag will disappear. And if auto exports recover to the pre-WLTP level after this one-off and temporary shock, Germany will receive a 0.6% mirror-image boost to growth.2
Chart I-6
German Auto Exports Suffered A WLTP Hit
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Regional Allocation Is Always And Everywhere About Sectors
The European equity earnings cycle is tightly connected with global growth oscillations (Chart I-7). The simple reason is that the European equity market is over-exposed to classically growth-sensitive sectors such as banks and industrials.
Chart I-7
The European EPS Cycle Is Tightly Connected With Global Growth Oscillations
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The emerging market earnings cycle is also connected with global growth oscillations (Chart I-8) because emerging markets have a very high exposure to banks. But the much less understood reason is that emerging markets have a near-zero exposure to healthcare (Table I-1). In sharp contrast, the U.S. equity earnings cycle has almost no connection with global growth oscillations (Chart I-9) because the U.S. equity market is over-exposed to technology and healthcare, neither of which are classically cyclical sectors.
Chart I-8
The EM EPS Cycle Is Also Connected With Global Growth Oscillations...
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Chart I-9
...But The U.S. EPS Cycle Is Not Connected With Global Growth Oscillations
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Table I-1
Each Major Stock Market Has A Distinguishing Fingerprint
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Hence the allocation to emerging market (EM) versus developed market (DM) equities, and to Europe versus the U.S. reduce to simple equity sector calls. A quick glance at Chart I-10 and Chart I-11 will reveal two fundamental and inescapable truths:
Chart I-10
EM Outperforms DM When Global Banks Outperform Healthcare
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Chart I-11
European Equities Outperform U.S. Equities When Global Banks Outperform Technology
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- EM outperforms DM when global banks outperform global healthcare.
- European equities outperform U.S. equities when global banks outperform global technology.
But is this just about so-called ‘beta’? No, banks can outperform in a rising market by going up more or, as recently, in a falling market by going down less. So this is always and everywhere about head-to-head sector relative performances.
My colleague Arthur Budaghyan, our chief emerging market strategist, remains steadfastly pessimistic on the structural outlook for EM versus DM. We agree with Arthur, albeit we arrive at the structural conclusion from a completely different perspective. To reiterate, for EM to outperform DM global banks must outperform global healthcare. However, over an extended period this will prove to be an extremely tall order.
As detailed in European Banks: The Case For And Against, blockchain is a long-term extinction threat to banks’ business models and profitability. Whereas healthcare is still a major growth sector as people focus more spending on improving the quality and quantity of their lifespans.3
Nevertheless, from a purely tactical perspective, the growth up-oscillation phase that started in October can continue for a little while longer allowing the recent countertrend moves to persist – especially as the recent decline in bond yields could further spur credit growth in the near term. So for the moment stay overweight:
- EM versus DM.
- European equities versus U.S. equities.
- Italian assets versus European assets.
Bargain Basement Currencies
Another of my colleagues Doug Peta, our chief U.S. strategist, has coined a lovely metaphor: “you cannot get hurt falling out of a basement window”. The metaphor beautifully captures the asymmetry when you are near the floor or ‘zero-bound’. Doug uses it to explain that small contributors to an economy have a limited capacity to damage economic growth because they cannot fall very far. We think the metaphor applies equally to interest rates when they are at or near their lower bound, which is to say, in the basement.
This begs the obvious question: if interest rates are in the basement, then what is it that cannot get hurt much? The answer is: the exchange rate.
The payoff profile for exchange rates just tracks expected long-term interest rate differentials. This means that when the expected interest rate is in or near the basement, the currency possesses a highly attractive payoff profile called positive skew.
In essence, for any central bank already at the realistic limit of ultra-loose policy – such as the BoJ and ECB – policy rate expectations are effectively in the basement. They cannot go significantly lower. In contrast, policy rate expectations for the Federal Reserve are somewhere between the seventh and twelfth storey of the building (Chart I-12). From which you can get seriously hurt if you fall out of the window!
Chart I-12
You Cannot Get Hurt Falling Out Of A Basement Window
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The upshot is that currency investors should always own at least one currency whose interest rate is in the basement against one whose interest rate is high up in the building, susceptible to fall out at some point, and get seriously hurt.
The near term complication is the risk, albeit low, of a no-deal Brexit which would hurt European economies and currencies to a greater or lesser extent. Until the Brexit fog shows some signs of clearing, we would prefer the currency whose interest rate is in the basement to be a non-European currency.
So for the moment, our favourite major currency remains the JPY.
Dhaval Joshi, Senior Vice President
Chief European Investment Strategist
dhaval@bcaresearch.com
Fractal Trading System*
We are pleased to report that the 50:50 combination of Litecoin and Ethereum has surged by 42 percent in just two weeks! Also, long EUR/NZD achieved its 2.5 percent profit target and is now closed.
This week’s trade is in line with the recommendation in the main body of this report to become pro-cyclical. Go long global industrials versus global utilities with a profit target of 3 percent and a symmetrical stop-loss.
For any investment, excessive trend following and groupthink can reach a natural point of instability, at which point the established trend is highly likely to break down with or without an external catalyst. An early warning sign is the investment’s fractal dimension approaching its natural lower bound. Encouragingly, this trigger has consistently identified countertrend moves of various magnitudes across all asset classes.
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The post-June 9, 2016 fractal trading model rules are:
- When the fractal dimension approaches the lower limit after an investment has been in an established trend it is a potential trigger for a liquidity-triggered trend reversal. Therefore, open a countertrend position.
- The profit target is a one-third reversal of the preceding 13-week move. Apply a symmetrical stop-loss.
- Close the position at the profit target or stop-loss. Otherwise close the position after 13 weeks.
- Use the position size multiple to control risk. The position size will be smaller for more risky positions.
* For more details please see the European Investment Strategy Special Report “Fractals, Liquidity & A Trading Model,” dated December 11, 2014, available at eis.bcaresearch.com
Footnotes
- 1 The European banks position is relative to the broader equity market, and the recommended combination is 25 cents in the banks and 75 cents in the bonds.
- 2 German auto net exports and GDP are quoted at annualized rates. The Worldwide Harmonized Light Vehicle test Procedure (WLTP) is a new standard for auto emissions that took effect on September 1, 2018.
- 3 Please see the European Investment Strategy Special Report “European Banks: The Case For And Against”, November 8, 2018 available at eis.bcaresearch.com.
Fractal Trading System
POSITIONS | INITIATION DATE | PROFIT TARGET / STOP-LOSS (%) | POSITION SIZE | MAXIMUM RETURN (%)* | TRADING RULE RETURN** (%) | COMMENTS |
LONG GLOBAL INDUSTRIALS VERSUS UTILTIES | 10 Jan 2019 | 3.0 | 1 | OPEN POSITION | ||
LONG LITECOIN AND ETHEREUM | 20 Dec 2018 | 60.0 | 0.05 | 42.0 | 2.1 | OPEN POSITION |
LONG EUR/NZD | 13 Dec 2018 | 2.5 | 1 | 3.0 | 2.5 | |
LONG MIB VERSUS EUROSTOXX | 29 Nov 2018 | 5.0 | 0.5 | 3.7 | 1.4 | OPEN POSITION |
LONG EM / SHORT DM | 22 Nov 2018 | 2.5 | 1 | 7.7 | 2.5 | |
LONG NICKEL / SHORT PALLADIUM | 15 Nov 2018 | 14.0 | 0.25 | NONE | -3.5 | |
LONG PORTUGAL / SHORT HUNGARY | 25 Oct 2018 | 6.0 | 0.5 | 1.0 | -3.0 | |
SHORT AUSTRALIAN TELECOMS VERSUS INSURANCE | 18 Oct 2018 | 7.0 | 0.5 | NONE | -3.5 | |
LONG CRB INDUSTRIALS VERSUS MSCI WORLD | 11 Oct 2018 | 2.0 | 1 | 15.9 | 2.0 | |
LONG EUROSTOXX50 VERSUS NIKKEI225 | 04 Oct 2018 | 3.5 | 1 | 10.1 | 3.5 | |
SHORT U.S. TELECOM / LONG U.S. AUTOS | 20 Sep 2018 | 9.0 | 0.33 | 9.1 | -3.0 | |
SHORT PALLADIUM/LONG COPPER | 13 Sep 2018 | 6.0 | 0.5 | 0.2 | -3.0 | |
LONG CHINA / SHORT INDIA | 06 Sep 2018 | 9.0 | 0.33 | 9.5 | 3.0 | |
SHORT EUROPEAN HEALTHCARE VERSUS BANKS | 31 Aug 2018 | 10.0 | 0.25 | 8.2 | 0.6 | |
LONG BASIC RESOURCES / SHORT CHEMICALS | 23 Aug 2018 | 3.5 | 1 | 3.6 | 3.5 | |
LONG EM / SHORT DM | 02 Aug 2018 | 2.5 | 1 | NONE | -2.5 | |
LONG GOLD | 19 Jul 2018 | 3.0 | 1 | 0.2 | -3.0 | |
SHORT TRADE-WEIGHTED DOLLAR | 05 Jul 2018 | 2.0 | 1 | 0.8 | -0.8 | |
SHORT CONSUMER SERVICES VERSUS CONSUMER GOODS | 28 Jun 2018 | 2.5 | 1 | 1.2 | -2.5 | |
SHORT EURO AREA ENERGY VERSUS FINANCIALS | 14 Jun 2018 | 6.0 | 0.5 | 0.6 | -2.3 | |
LONG PLATINUM / SHORT NICKEL | 07 Jun 2018 | 14.0 | 0.25 | 7.8 | 2.0 | |
LONG PLN / USD | 31 May 2018 | 3.5 | 1 | 3.1 | 2.1 | |
LONG POLAND / SHORT ITALY | 17 May 2018 | 5.0 | 0.5 | 7.8 | 2.5 | |
SHORT EURO AREA ENERGY VERSUS GLOBAL BASIC MATERIAL | 03 May 2018 | 5.0 | 0.5 | 6.3 | 2.5 | |
LONG SEK / GBP | 19 Apr 2018 | 3.0 | 1 | 3.9 | 3.0 | |
10-YEAR BONDS: SHORT SPAIN / LONG GERMANY | 12 Apr 2018 | 1.0 | 2 | 5.5 | 2.0 | |
LONG AUD/NOK | 05 Apr 2018 | 2.0 | 1 | 3.2 | 2.0 | |
SHORT NICKEL / LONG LEAD | 22 Mar 2018 | 8.0 | 0.5 | 4.0 | -4.0 | |
SHORT HELSINKI OMX/ LONG EUROSTOXX 600 | 15 Mar 2018 | 3.0 | 1 | 3.6 | 3.0 | |
SHORT CHILEAN PESO / USD | 08 Mar 2018 | 2.7 | 1 | 6.1 | 2.7 | |
LONG GLOBAL UTILITIES VERSUS MARKET | 08 Feb 2018 | 3.5 | 1 | 5.4 | 3.5 | |
LONG USD/ZAR | 01 Feb 2018 | 6.0 | 0.5 | 6.5 | 3.0 | |
SHORT JAPANESE ENERGY VERSUS MARKET | 25 Jan 2018 | 8.0 | 0.5 | 9.4 | 4.0 | |
SHORT S&P500 / LONG EUROSTOXX 50 | 11 Jan 2018 | 2.0 | 1 | 0.1 | -2.0 | |
SHORT PALLADIUM | 04 Jan 2018 | 6.0 | 0.5 | 15.0 | 3.0 | |
SHORT BITCOIN | 21 Dec 2017 | $12750/28000 | 0.1 | 139.5 | 2.9 | |
LONG SILVER | 14 Dec 2017 | 4.5 | 1 | 11.6 | 4.5 | |
SHORT WTI CRUDE | 30 Nov 2017 | 7.5 | 0.33 | 2.6 | -2.5 | |
SHORT NIKKEI 225 / LONG EUROSTOXX50 | 09 Nov 2017 | 3.0 | 1 | 1.0 | -3.0 | |
LONG NZD / USD | 02 Nov 2017 | 3.0 | 1 | 6.8 | 3.0 | |
SHORT COPPER / LONG TIN | 26 Oct 2017 | 5.0 | 0.5 | 5.9 | 2.5 | |
SHORT NORWAY / LONG SWITZERLAND | 19 Oct 2017 | 2.0 | 1 | 1.5 | -2.0 | |
LONG IBEX35 / SHORT EUROSTOXX50 | 12 Oct 2017 | 2.5 | 1 | 2.1 | 1.7 | |
10-YEAR BONDS: LONG CANADA / SHORT GERMANY | 05 Oct 2017 | 1.0 | 2 | 1.7 | 2.0 | |
LONG U.K. PERSONAL AND HOUSEHOLD GOODS / SHORT U.K. FOOD AND BEVS. | 21 Aug 2017 | 4.5 | 0.5 | 1.5 | 0.1 | |
LONG USD / CAD | 14 Sep 2017 | 2.5 | 1 | 5.9 | 2.5 | |
SHORT BASIC MATERIALS VERSUS MARKET | 07 Sep 2017 | 2.5 | 1 | 2.5 | 2.5 | |
SHORT NICKEL / LONG SILVER | 31 Aug 2017 | 8.0 | 0.5 | 9.2 | 4.0 | |
SHORT MSCI TURKEY / LONG EUROSTOXX600 | 17 Aug 2017 | 5.0 | 0.5 | 9.7 | -2.5 | |
SHORT MSCI CHINA / LONG MSCI EM | 03 Aug 2017 | 2.5 | 1 | NONE | -2.5 | |
LONG USD/CAD | 27 Jul 2017 | 2.5 | 1 | 3.5 | 2.5 | |
LONG MEDIASET ESPANA / SHORT IBEX35 | 20 Jul 2017 | 5.0 | 0.5 | 2.5 | -2.5 | |
LONG DM / SHORT EM | 29 Jun 2017 | 3.0 | 1 | NONE | -3.0 | |
LONG NICKEL / SHORT PALLADIUM | 15 Jun 2017 | 10.0 | 0.5 | 29.7 | 5.0 | |
SHORT EURO / DOLLAR | 08 Jun 2017 | 2.0 | 1 | 1.2 | -2.0 | |
LONG NICKEL / SHORT TIN | 25 May 2017 | 6.5 | 0.5 | 27.0 | 3.3 | |
SHORT CAC40 / LONG EUROSTOXX600 | 11 May 2017 | 1.5 | 1 | 1.3 | 0.7 | |
10-YEAR BONDS: SHORT PORTUGAL / LONG SPAIN | 04 May 2017 | 2.5 | 1 | NONE | -2.5 | |
LONG FTSE100 / SHORT IBEX35 | 27 Apr 2017 | 4.0 | 1 | 4.7 | 4.0 | |
LONG SUGAR / SHORT ALUMINIUM | 13 Apr 2017 | 10.0 | 0.5 | 1.5 | -5.0 | |
SHORT AEX | 16 Mar 2017 | 2.5 | 1 | 0.8 | -2.5 | |
SHORT RUB / USD | 09 Mar 2017 | 3.0 | 1 | 1.5 | -3.0 | |
LONG TIN / SHORT COPPER | 23 Feb 2017 | 5.0 | 0.5 | 13.4 | 2.5 | |
SHORT MSCI AC WORLD | 09 Feb 2017 | 2.5 | 1 | NONE | -2.5 | |
SHORT BASIC MATERIAL EQUITIES | 02 Feb 2017 | 3.5 | 1 | 2.5 | 0.8 | |
LONG NOK/RUB | 26 Jan 2017 | 2.0 | 1 | 3.2 | 2.0 | |
SHORT ITALY MIB / LONG HONG KONG HANG SENG | 12 Jan 2017 | 6.0 | 0.5 | 8.5 | 3.0 |
* THE MAXIMUM RETURN CAPTURES THE POSITION'S POINT OF MAXIMUM PROFIT (UNWEIGHTED BY THE POSITION SIZE).
** THE TRADING RULE RETURN IS WEIGHTED BY THE POSITION SIZE.
Recommendations
Asset Allocation
ASSET ALLOCATION | INITIATION/ MODIFICATION DATE | RETURN (%) | COMMENTS |
LONG INDUSTRIAL COMMODITIES VERSUS EQUITIES | 11 Oct 2018 | 10.1 |
Equity Regional and Country Allocation
EQUITY REGIONAL AND COUNTRY ALLOCATION | INITIATION/ MODIFICATION DATE | RETURN (%) | COMMENTS |
LONG FRANCE, IRELAND AND SWITZERLAND VERSUS MARKET | 18 Sep 2018 | 6.2 | RETURN IS BASED ON EVOLVING ALLOCATION. INITIATION DATE WAS 13-NOV-14. |
SHORT NORWAY AND DENMARK VERSUS MARKET | 18 Oct 2018 | 2.6 | RETURN IS BASED ON EVOLVING ALLOCATION. INITIATION DATE WAS 13-NOV-14. |
Equity Sector Allocation
EQUITY SECTOR ALLOCATION | INITIATION/ MODIFICATION DATE | RETURN (%) | COMMENTS |
LONG EUROPEAN CLOTHES VERSUS MARKET | 06 Dec 2018 | 1.9 | |
LONG EUROPEAN BANKS RELATIVE PLUS U.S. T-BOND (25:75 COMBINATION) | 29 Nov 2018 | 3.0 | |
LONG EUROPEAN AIRLINES VERSUS MARKET | 01 Feb 2018 | -16.1 | |
LONG ANIMAL CARE BASKET VERSUS EUROSTOXX600 | 10 Aug 2017 | 5.3 | LONG TERM INVESTORS CAN GO LONG ONLY |
LONG EURO AREA RETAILERS / SHORT U.S RETAILERS | 15 Jun 2017 | -30.5 | |
LONG FTSE100 VERSUS FTSE250 | 23 Feb 2017 | -1.2 | |
LONG EUROSTOXX VERSUS EUROSTOXX50 | 23 Feb 2017 | 2.3 | |
LONG EURO STOXX AND SHORT VIX TERM STRUCTURE (100:40 COMBINATION) | 30 Mar 2016 | 34.5 | was 100:20 UNTIL 30-MAR-16. initiation date was 13-mar-14. |
LONG GERMAN CONSUMER SERVICES / SHORT GERMAN EXPORTERS | 24 Sep 2015 | -9.3 | |
LONG SPANISH REAL ESTATE EQUITIES VERSUS MARKET | 23 Apr 2015 | -0.9 | LEVERED DOWN 0.2 TIMES |
LONG SWISS EQUITIES AND CASH (50:50 COMBINATION) | 22 Jan 2015 | 11.3 | |
LONG SPANISH BANK EQUITIES / SHORT AUSTRALIAN BANK EQUITIES | 18 Jun 2014 | -4.0 | LEVERED DOWN 0.2 TIMES |
LONG EURO AREA TELECOMS VERSUS MARKET | 08 Aug 2013 | 6.2 | |
SHORT U.K. CONSUMER SERVICES VERSUS THE MARKET | 07 Mar 2013 | -10.2 | |
LONG GERMAN CONSUMER SERVICES VERSUS THE MARKET | 24 Jan 2013 | 4.8 | |
LONG GERMAN REAL ESTATE EQUITIES / SHORT EURO AREA EQUITIES | 05 Apr 2012 | 82.4 | |
LONG PERSONAL PRODUCTS VERSUS MARKET | 22 Dec 2011 | 40.3 | |
LONG COMPUTER HARDWARE VERSUS MARKET | 22 Dec 2011 | 45.2 | |
LONG HEALTHCARE VERSUS MARKET | 14 Apr 2011 | 26.0 |
Bond and Interest Rate Allocation
BOND AND INTEREST RATE ALLOCATION | INITIATION/ MODIFICATION DATE | RETURN (%) | COMMENTS |
LONG 10-YEAR ITALIAN BTPS / SHORT 10-YEAR SPANISH BUNOS | 20 Dec 2018 | 0.0 | |
LONG DEC 2022 EURODOLLAR / SHORT EURIBOR FUTURES | 30 Nov 2017 | -1.5 | LEVERED UP 5 TIMES |
LONG 10-YEAR NORWEGIAN BONDS / SHORT 10-YEAR GERMAN BUNDS | 30 Nov 2017 | -1.4 | |
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR IRISH BONDS | 30 Nov 2017 | 3.1 | |
LONG 10-YEAR ITALIAN BONDS / SHORT 10-YEAR FRENCH OATS | 16 Nov 2017 | -5.5 | |
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR GERMAN BUNDS | 09 Nov 2017 | 0.4 | |
LONG DEC 2019 3M STERLING FUTURE | 25 Feb 2016 | -0.2 | LEVERED UP 5 TIMES |
LONG DEC 2019 EURODOLLAR FUTURE | 25 Feb 2016 | -5.8 | LEVERED UP 5 TIMES |
LONG 10-YEAR SPANISH BONDS / SHORT 10-YEAR FRENCH OATS | 12 Nov 2015 | 4.5 | |
LONG 10-YEAR DANISH BONDS / SHORT 10-YEAR GERMAN BUNDS | 05 Nov 2015 | 2.6 | |
LONG 5-YEAR U.K. GILTS | 08 Oct 2014 | 10.7 | |
LONG 5-YEAR GERMAN CPI INFLATION SWAP | 14 Nov 2013 | 0.2 | |
LONG 10-YEAR PORTUGUESE BONDS VERSUS EURO AREA | 24 Oct 2013 | 36.7 | |
OVER 10-YEAR BONDS: LONG U.S. / SHORT GERMANY | 25 Jul 2013 | -5.0 | |
LONG 10-YEAR U.K. GILTS / SHORT 10-YEAR SWEDISH BONDS | 14 Feb 2013 | -0.7 |
Currency and Other Allocation
CURRENCY AND OTHER ALLOCATION | INITIATION/ MODIFICATION DATE | RETURN (%) | COMMENTS |
LONG YEN / SHORT EURO | 18 Jan 2018 | 9.3 | |
LONG EURO AND SWEDISH KRONA / SHORT DOLLAR (50:50) | 24 Aug 2017 | 10.3 | WAS LONG EUR/GBP FROM 31-MAR-16 TO 29-JUN-17 AND LONG EURO/USD FROM 29-JUN-17 TO 24-AUG-17 |
LONG EURO / SHORT YUAN | 22 Dec 2016 | 8.3 | |
LONG HEALTHCARE AND U.S. T-BOND (40:60 COMBINATION) | 13 Mar 2014 | 47.4 | GERMAN BUND SWITCHED TO T-BOND ON 23-APR-15 |
VIX FUTURE: LONG NEAR-MONTH / SHORT FAR-MONTH | 27 Feb 2014 | 1.3 | LEVERAGED DOWN 0.25 TIMES |
SHORT SOVEREIGN YIELD SPREAD FUTURES (ITALY VS. GERMANY) | 03 Nov 2012 | 2 | |
LONG VIX (S&P 500) / SHORT VDAX (DAX) (10% EXPOSURE) | 20 Oct 2011 | 6.2 | EXPOSURE CUT ON SEPT 27 2012 |
Closed Fractal Trades
TRADES CLOSED IN 2018 | INITIATION DATE | PROFIT TARGET / STOP-LOSS (%) | POSITION SIZE | MAXIMUM RETURN (%)* | TRADING RULE RETURN** (%) |
SHORT RUB / USD | 09 Mar 2017 | 3.0 | 1 | 1.5 | -3.0 |
LONG TIN / SHORT COPPER | 23 Feb 2017 | 5.0 | 0.5 | 13.4 | 2.5 |
SHORT MSCI AC WORLD | 09 Feb 2017 | 2.5 | 1 | NONE | -2.5 |
SHORT BASIC MATERIALS EQUITIES | 02 Feb 2017 | 3.5 | 1 | 2.5 | 0.8 |
LONG NOK / RUB | 26 Jan 2017 | 2.0 | 1 | 3.2 | 2.0 |
SHORT ITALY MIB / LONG HONG KONG HANG SENG | 12 Jan 2017 | 6.0 | 0.5 | 0.5 | 3.0 |
* THE MAXIMUM RETURN CAPTURES THE POSITION'S POINT OF MAXIMUM PROFIT (UNWEIGHTED BY THE POSITION SIZE).
** THE TRADING RULE RETURN IS WEIGHTED BY THE POSITION SIZE.
TRADES CLOSED IN 2017 | INITIATION DATE | PROFIT TARGET / STOP-LOSS (%) | POSITION SIZE | MAXIMUM RETURN (%)* | TRADING RULE RETURN** (%) |
SHORT AEX | 16 Mar 2017 | 2.5 | 1 | 0.8 | -2.5 |
LONG GOLD | 15 Dec 2016 | 4.0 | 1 | 8.8 | 4.0 |
SHORT GREEK 10-YEAR BOND | 08 Dec 2016 | 4.0 | 1 | 7.2 | 4.0 |
LONG ITALY / SHORT FRANCE 10-YEAR BOND | 05 Dec 2016 | 0.6 | 2 | 1.3 | 1.2 |
LONG PLATINUM / SHORT PALLADIUM | 24 Nov 2016 | 8.0 | 0.5 | 9.8 | 4.0 |
SHORT FRENCH BANKS / LONG CAC40 | 03 Nov 2016 | 6.0 | 0.5 | 1.7 | -3.0 |
LONG SILVER / SHORT LEAD | 13 Oct 2016 | 8.0 | 0.5 | 5.5 | -4.0 |
* THE MAXIMUM RETURN CAPTURES THE POSITION'S POINT OF MAXIMUM PROFIT (UNWEIGHTED BY THE POSITION SIZE).
** THE TRADING RULE RETURN IS WEIGHTED BY THE POSITION SIZE.
TRADES CLOSED IN 2016 | INITIATION DATE | PROFIT TARGET / STOP-LOSS (%) | POSITION SIZE | MAXIMUM RETURN (%)* | TRADING RULE RETURN** (%) |
LONG U.K. HEALTHCARE VERSUS MARKET | 10 Nov 2016 | 3.0 | 1 | 2.5 | -3.0 |
LONG COPPER / SHORT TIN | 27 Oct 2016 | 6.5 | 0.5 | 26.5 | 3.3 |
LONG SEK / NOK | 06 Oct 2016 | 2.0 | 1 | 1.9 | -2.0 |
LONG PLATINUM / SHORT PALLADIUM | 06 Oct 2016 | 7.5 | 0.5 | 13.4 | 3.8 |
SHORT ALUMINIUM / SHORT LEAD | 22 Sep 2016 | 6.5 | 0.5 | 8.3 | 3.3 |
LONG U.K. TELELCOMS / SHORT FTSE 100 | 08 Sep 2016 | 4.0 | 1 | 1.3 | -4.0 |
SHORT MSCI EMERGING MARKETS | 25 Aug 2016 | 3.5 | 1 | 4.0 | 3.5 |
SHORT SEMICONDUCTORS | 11 Aug 2016 | 6.5 | 0.5 | 0.1 | -3.3 |
SHORT U.K. A-RATE CORPORATE BONDS | 11 Aug 2016 | 4.0 | 1 | 5.1 | 4.0 |
SHORT U.K. A-RATED CORPORATE BONDS | 28 Jul 2016 | 2.6 | 1 | 0.3 | -2.6 |
LONG SWISS / SHORT U.K. 10-YEAR | 21 Jul 2016 | 1.7 | 1 | 0.5 | -1.7 |
LONG U.K. TELECOMS / SHORT U.K. ENERGY | 14 Jul 2016 | 8.0 | 0.5 | 12.2 | 4.0 |
LONG U.K. HOMEBUILDERS / SHORT EUROSTOXX 600 | 30 Jun 2016 | 12.0 | 0.5 | 16.6 | 6.0 |
LONG U.K. CLOTHING AND ACCESSORIES | 09 Jun 2016 | 6.0 | 1 | 19.4 | -6.0 |
SHORT EUROPEAN COMPUTER SERVICES | 02 Jun 2016 | 4.5 | 1 | 12.5 | 4.5 |
SHORT SOYBEAN FUTURES | 19 May 2016 | 10 | 0.5 | 2.0 | -1.5 |
SHORT CONSTRUCTION AND BUILDING MATERIALS | 12 May 2016 | 3.0 | 1 | 7 | 3.0 |
SHORT BASIC MATERIALS | 28 Apr 2016 | 10.0 | 0.5 | 6.6 | 1.4 |
SHORT EQUITIES (MSCI WORLD) | 21 Apr 2016 | 4.0 | 1 | 3.6 | 3.6 |
SHORT TURKEY ISTANBUL 100 / LONG EUROSTOXX 50 | 07 Apr 2016 | 5.0 | 0.5 | 10.5 | 2.5 |
SHORT GERMAN INDUSTRIALS / LONG DAX | 24 Mar 2016 | 2.0 | 0.5 | NONE | -3.6 |
SHORT 30-YEAR JGBS / LONG CANADIAN 30-YEAR BONDS | 24 Mar 2016 | 10 | 0.5 | 1.2 | -0.6 |
SHORT AEX / LONG EUROSTOXX 50 | 03 Mar 2016 | 4.0 | 1 | 1.7 | 1.6 |
LONG CAC 40 / SHORT FTSE100 | 25 Feb 2016 | 3.0 | 1 | 3.3 | 3.0 |
SHORT U.K. GOLD MINERS | 18 Feb 2016 | 20.0 | 0.25 | NONE | -4.2 |
LONG SWISS BONDS / SHORT GERMAN BOND | 18 Feb 2016 | 0.8 | 3 | 0.1 | -3.3 |
LONG EUROPEAN CONSUMER FINANCE / SHORT EUROSTOXX 600 | 04 Feb 2016 | 10.0 | 0.5 | 2.3 | 0.9 |
LONG POUND / DOLLAR | 21 Jan 2016 | 4.0 | 1 | 2.9 | 0.5 |
SHORT IRISH EQUITIES / LONG EUROSTOXX 50 | 14 Jan 2016 | 8.0 | 0.5 | 4.2 | 1.5 |
SHORT EUROPEAN RENEWABLE ENERGY | 07 Jan 2016 | 5.0 | 1 | 17.6 | 5.0 |
SHORT EUROPEAN BREWERS | 10 Dec 2015 | 5.0 | 1 | 8.3 | 4.3 |
* THE MAXIMUM RETURN CAPTURES THE POSITION'S POINT OF MAXIMUM PROFIT (UNWEIGHTED BY THE POSITION SIZE).
** THE TRADING RULE RETURN IS WEIGHTED BY THE POSITION SIZE.
TRADES CLOSED IN 2015 | INITIATION DATE | TARGET / RETURN (%) | POSITION SIZE | MAXIMUM RETURN (%)* | TRADING RULE RETURN (%) |
SHORT 7-YEAR GERMAN BUNDS / LONG CANADIAN 7-YEAR BONDS | 03 Dec 2015 | 5.0 | 1 | 3.1 | 2.2 |
SHORT GERMAN TECHNOLOGY VERSUS THE MARKET | 19 Nov 2015 | 5 | 1.1 | -2.5 | |
LONG 10-YEAR DANISH BONDS / SHORT 10-YEAR GERMAN BUNDS | 05 Nov 2015 | 5 | 0.8 | 0.7 | |
SHORT EUROPEAN TOYS SECTOR | 21 Oct 2015 | 5 | 3.8 | -2.5 | |
SHORT CAC40 / LONG EUROSTOXX 50 | 07 Oct 2015 | 5 | 2.4 | 1.2 | |
LONG ZAR / YEN | 09 Sep 2015 | 2.5 | 6.3 | 2.5 | |
LONG AEX / SHORT ISEQ | 09 Sep 2015 | 5 | 6.3 | -2.5 | |
LONG ZAR / YEN | 02 Sep 2015 | 2.5 | 2.0 | -1.3 | |
LONG GOLD | 12 Aug 2015 | 5 | 3.8 | 0.0 | |
LONG CAD / GBP | 22 Jul 2015 | 2.5 | 1.2 | -0.9 | |
LONG NZD /AUD AND NZD / CAD | 01 Jul 2015 | 2.5 | 3.8 | 2.5 | |
LONG GERMAN BUND | 10 Jun 2015 | 5 | 3.8 | 3.0 | |
SHORT SHANGHAI A SHARE / LONG EUROSTOXX 600 | 03 Jun 2015 | 5 | 26.8 | -2.5 | |
SHORT SHANGHAI A SHARE / LONG EUROSTOXX 600 | 27 May 2015 | 5 | 22.1 | 5.0 | |
SHORT HANG SENG | 15 Apr 2015 | 5 | 3.4 | 1.3 | |
LONG TIN | 08 Apr 2015 | 5 | NONE | -5.0 | |
SHORT GBP / EUR | 01 Apr 2015 | 2.5 | 2.6 | 1.7 | |
SHORT GBP / EUR | 04 Mar 2015 | 2.5 | 2.2 | 0.4 | |
SHORT GERMAN AUTOS VS. THE MARKET | 18 Feb 2015 | 5 | 2.0 | -1.7 | |
LONG AUD / USD | 04 Feb 2015 | 2.5 | 1.8 | 1.0 | |
LONG TRADE WEIGHTED EURO | 28 Jan 2015 | 5 | 1.3 | 0.3 | |
LONG MXN / USD | 14 Jan 2015 | 2.5 | 0.7 | -1.7 | |
SHORT EUROPEAN RETAILERS, LONG EUROSTOXX 600 | 07 Jan 2015 | 5 | 0.4 | 0.2 |
* WITHIN 8 WEEKS OF INITIATION.
Trades
Closed Trades
TRADES CLOSED IN 2018 | INITIATE DATE | CLOSE DATE | TOTAL RETURN (%) | LINK TO REPORTS |
LONG EUROSTOXX 600 / SHORT MSCI WORLD EX. U.S. (CURRENCY UNHEDGED) | 20 Sep 2012 | 29 Oct 2018 | -17.8 | NOV 1/18 |
LONG IRELAND / SHORT SPAIN | 12 Apr 2012 | 26 Oct 2018 | 17.7 | NOV 1/18 |
SHORT BASIC MATERIALS VERSUS MARKET | 30 Nov 2017 | 04 Oct 2018 | 7.1 | SEP 20/18 |
LONG GLOBAL 30-YEAR GOVERNMENT BONDS | 10 May 2018 | 04 Oct 2018 | 0.0 | SEP 20/18 |
SHORT BANKS VERSUS HEALTHCARE | 01 Feb 2018 | 30 Aug 2018 | 22.6 | AUG 30/18 |
SHORT TURKISH LIRA / LONG SOUTH AFRICAN RAND | 20 Mar 2014 | 23 Aug 2018 | 104.9 | AUG 23/18 |
SHORT POLAND / LONG EUROSTOXX600 | 29 Jun 2017 | 17 May 2018 | 11.9 | MAY 17/18 |
LONG EQUITY PLUS AT-THE-MONEY PUT OPTION (MARCH 2018 EXPIRY) | 27 Jul 2017 | 31 Mar 2018 | 8.5 | JUL 27/17 |
TRADES CLOSED IN 2017 | INITIATE DATE | CLOSE DATE | TOTAL RETURN (%) | LINK TO REPORTS |
SHORT EURO AREA BANKS VERSUS MARKET | 03 Dec 2015 | 14 Sep 2017 | 4.8 | SEP 14/17 |
TRADES CLOSED IN 2016 | INITIATE DATE | CLOSE DATE | TOTAL RETURN (%) | LINK TO REPORTS |
LONG 10-YEAR U.K. GILTS AND SPANISH BONOS (50:50 COMBINATION) | 07 Apr 2016 | 22 Sep 2016 | 6.6 | SEP 22/16 |
LONG U.K. A RATED CORPORATE BONDS | 13 Oct 2011 | 28 Jul 2016 | 42.4 | JUL 28/16 |
LONG EURO / SHORT DOLLAR | 30 Oct 2014 | 31 Mar 2016 | -11.4 | MAR 31/16 |
SHORT POUND / LONG DOLLAR | 20 Feb 2014 | 31 Mar 2016 | 17.2 | MAR 31/16 |
LONG DEC 2018 EURODOLLAR / SHORT DEC 2018 EURIBOR | 05 Nov 2015 | 25 Feb 2016 | 3.9 | FEB 25/16 |
LONG DEC 2017 3M STERLING FUTURE | 11 Jun 2015 | 25 Feb 2016 | 5.2 | FEB 25/16 |
TRADES CLOSED IN 2015 | INITIATE DATE | CLOSE DATE | TOTAL RETURN (%) | LINK TO REPORTS |
LONG OVER 10-YEAR AGGREGATE EURO AREA BOND | 28 Nov 2013 | 10 Dec 2015 | 31.7 | DEC 10/15 |
ITALIAN GOVT. BONDS: 2-10 YEAR FLATTENER | 27 Sep 2012 | 10 Dec 2015 | 33.2 | DEC 10/15 |
LONG DEC 2017 EURODOLLAR / SHORT DEC 2017 EURIBOR | 23 Apr 2015 | 05 Nov 2015 | 1.5 | NOV 5/15 |
LONG NETHERLANDS EQUITIES / SHORT U.K. EQUITIES | 28 Mar 2013 | 18 Jun 2015 | 30.4 | JUN 18/15 |
LONG JUNE 2016 3M STERLING FUTURE (LEVERED UP 5 TIMES) | 27 Feb 2014 | 11 Jun 2015 | 0.5 | JUN 11/15 |
LONG EURO AREA LARGE CAPS / SHORT EURO AREA SMALL CAPS | 01 Nov 2012 | 05 Mar 2015 | -12.1 | MAR 5/15 |
PROTECTOR PORTFOLIO | 04 Aug 2011 | 22 Jan 2015 | 44.1 | JAN 22/15 |
TRADES CLOSED IN 2014 | INITIATE DATE | CLOSE DATE | TOTAL RETURN (%) | LINK TO REPORTS |
LONG GERMAN EQUITIES / SHORT SWISS EQUITIES | 09 Jun 2014 | 13 Nov 2014 | -7.6 | NOV 13/14 |
LONG GERMAN AND ITALIAN EQUITIES / SHORT FRENCH AND SPANISH EQUITIES | 08 Mar 2012 | 13 Nov 2014 | -2.8 | NOV 13/14 |
SHORT SEPTEMBER 2014 EURO / DOLLAR CALL OPTION STRIKE 1:45 | 20 Mar 2014 | 25 Sep 2014 | 1.4 | SEP 25/14 |
LONG POLISH AND CZECH EQUITIES (50:50) VERSUS EUROPE | 07 Nov 2013 | 05 Aug 2014 | -1.4 | AUG 7/14 |
LONG GREEK EQUITIES VERSUS EURO AREA | 17 Oct 2013 | 05 Aug 2014 | -2.1 | AUG 7/14 |
LONG SWISS EQUITIES / SHORT EURO AREA EQUITIES | 08 Sep 2011 | 05 Jun 2014 | 2.3 | JUN 5/14 |
SHORT COPPER | 21 Feb 2014 | 29 May 2014 | 2.9 | MAY 29/14 |
LONG SWISS AND ITALIAN 10-YEAR BONDS (50:50) RATIO | 09 Aug 2012 | 03 Apr 2014 | 14.8 | APR 3/14 |
SHORT TURKISH LIRA / LONG U.S. DOLLAR | 07 Nov 2013 | 20 Mar 2014 | 10.1 | MAR 20/14 |
LONG DOW JONES LUXURY INDEX / SHORT EURO STOXX | 14 Apr 2011 | 20 Mar 2014 | 32.5 | MAR 20/14 |
SHORT MARCH 2014 EURO / DOLLAR CALL OPTION STRIKE 1.45 | 31 Oct 2013 | 06 Mar 2014 | 0.9 | OCT 31/13 |
LONG JUNE 2014 3M STERLING FUTURE (LEVERED UP 5 TIMES) | 04 Jul 2013 | 27 Feb 2014 | 0.6 | FEB 27/14 |
VIX FUTURE: LONG NEAR-MONTH / SHORT FAR-MONTH (20% EXPOSURE) | 09 Jan 2014 | 30 Jan 2014 | 3.1 | JAN 30/14 |
EURO STOXX VOLATILITY FUTURES 1-MONTH / SHORT 6-MONTH (10% EXPOSURE) | 16 May 2013 | 09 Jan 2014 | 0.1 | JAN 9/14 |
Asset Performance
Currency & Bond
CURRENCY PERFORMANCES VERSUS THE DOLLAR* | LAST | 1-WEEK (%) | 1-MONTH (%) | YEAR-TO-DATE (%) |
EURO/USD | 1.10 | 0.1 | 0.6 | 0.8 |
GBP/USD | 1.30 | 0.0 | 1.6 | 1.0 |
CHF/USD | 1.00 | 0.0 | 0.9 | 0.9 |
SWE/USD | 8.90 | -0.6 | 1.9 | 1.0 |
DEN/USD | 8.50 | 1.1 | 0.2 | 2.0 |
NOR/USD | 6.50 | -0.2 | 0.7 | 0.9 |
10-YEAR GOVERNMENT BOND YIELD | LAST (%) | 1-WEEK (BPs) | 1-MONTH (BPs) | YEAR-TO-DATE (BPs) |
U.K. | 1.30 | 8.0 | -0.6 | 3.5 |
GERMANY | 0.20 | 7.3 | -1.8 | 3.7 |
SWITZERLAND | -0.10 | 7.6 | 3.8 | 4.6 |
SWEDEN | 0.40 | 4.4 | -4.2 | -10.7 |
Equity Sector
EQUITY SECTOR PERFORMANCE** | 1-WEEK (%) | 1-MONTH (%) | YEAR-TO-DATE (%) |
ENERGY | 3.4 | 1.6 | 2.0 |
MATERIALS | 2.6 | 5.0 | 3.5 |
CAPITAL GOODS | 3.3 | 2.6 | 4.0 |
COMMERCIAL SERVICES & SUPPLIES | 2.1 | 3.3 | 2.6 |
TRANSPORTATION | 4.7 | 1.4 | 4.0 |
AUTOMOBILES & COMPONENTS | 3.8 | 3.9 | 5.4 |
CONSUMER DURABLES & APPAREL | 2.1 | 4.0 | 2.7 |
HOTELS, RESTAURANTS & LEISURE | 2.7 | 2.7 | 2.9 |
MEDIA | 3.4 | 4.5 | 3.8 |
RETAILING | 8.2 | -6.9 | 7.2 |
FOOD & STAPLE RETAILING | 3.9 | 2.6 | 4.2 |
HOUSEHOLD & PERSONAL PRODUCTS | -0.7 | -3.6 | -0.7 |
HEALTH CARE & EQUIPMENT SERVICES | -0.2 | -2.4 | -0.1 |
PHARMACEUTICALS & BIOTECHNOLOGY | 2.5 | 1.1 | 2.2 |
BANKS | 3.4 | 2.2 | 3.8 |
DIVERSIFIED FINANCIALS | 4.2 | 4.1 | 3.9 |
INSURANCE | 1.2 | 1.8 | 1.8 |
REAL ESTATE | 3.6 | -0.9 | 4.0 |
SOFTWARE & SERVICES | 1.4 | 0.4 | 1.4 |
TECHNOLOGY HARDWARE & EQUIPMENT | 2.9 | 2.4 | 3.4 |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENTS | 0.2 | -1.7 | -0.3 |
TELECOMMUNICATION | 1.6 | 0.6 | 1.5 |
UTILITIES | 2.0 | 4.1 | 1.4 |
* POSITIVE PERCENTAGE CHANGE DENOTES APPRECIATION VERSUS THE US DOLLAR.
** BASED ON 10 GICS SECTORS; EXPRESSED IN LOCAL CURRENCY TERMS; SOURCE: MSCI INC.
Country Equity
COUNTRY EQUITY PERFORMANCE - LARGE CAP* | 1-WEEK CHANGE (%) | 1-MONTH CHANGE (%) | YEAR-TO-DATE CHANGE (%) |
U.K. | 1.6 | 1.3 | 1.5 |
SWITZERLAND | 2.4 | 0.9 | 2.4 |
FRANCE | 0.8 | 0.5 | 1.6 |
GERMANY | 2.6 | 1.7 | 2.4 |
AUSTRIA | 6.4 | -4.0 | 7.3 |
ITALY | 3.6 | 3.0 | 3.6 |
SPAIN | 3.8 | 3.5 | 3.5 |
PORTUGAL | 0.9 | 0.6 | 2.5 |
IRELAND | 3.1 | 7.9 | 3.5 |
BELGIUM | 5.1 | -0.7 | 5.7 |
FINLAND | 3.3 | 5.2 | 3.3 |
DENMARK | 4.3 | 2.3 | 2.9 |
NORWAY | 4.5 | 0.4 | 3.9 |
SWEDEN | 3.7 | 2.0 | 3.8 |
COUNTRY EQUITY PERFORMANCE - SMALL CAP* | 1-WEEK CHANGE (%) | 1-MONTH CHANGE (%) | YEAR-TO-DATE CHANGE (%) |
U.K. | 4.4 | 4.7 | 3.9 |
SWITZERLAND | 4.3 | 2.5 | 4.3 |
FRANCE | 3.7 | 3.2 | 4.3 |
GERMANY | 5.1 | 3.1 | 4.3 |
NETHERLANDS | 2.9 | 2.7 | 3.1 |
AUSTRIA | 4.5 | 3.7 | 3.3 |
ITALY | 4.6 | 3.8 | 3.9 |
SPAIN | 3.3 | 2.1 | 3.6 |
PORTUGAL | 4.9 | 3.4 | 4.7 |
IRELAND | 4.3 | 1.0 | 3.3 |
BELGIUM | 5.1 | 3.4 | 5.4 |
FINLAND | 6.0 | 4.3 | 4.1 |
DENMARK | 5.9 | 4.3 | 3.6 |
NORWAY | 5.6 | 1.9 | 4.9 |
SWEDEN | 4.2 | 3.4 | 3.7 |
* EXPRESSED IN LOCAL CURRENCY TERMS; SOURCE: MSCI INC
Indicators
Bond Yields
Chart II-1
Indicators To Watch - Bond Yields
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Chart II-2
Indicators To Watch - Bond Yields
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Chart II-3
Indicators To Watch - Bond Yields
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Chart II-4
Indicators To Watch - Bond Yields
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Interest Rate
Chart II-5
Indicators To Watch - Interest Rate Expectations
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Chart II-6
Indicators To Watch - Interest Rate Expectations
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Chart II-7
Indicators To Watch - Interest Rate Expectations
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Chart II-8
Indicators To Watch - Interest Rate Expectations
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