Currencies

Heading into a black hole, you pass a point of no return known as the ‘event horizon’ after which your impending oblivion is sealed. US recessions also have an event horizon, which we are fast approaching. We reveal a leading indicator of this event horizon, and what it means for investment strategy.

Global investors should sell Chinese assets on strength this year and diversify into other emerging markets. American investors should limit China exposure. Short CNY-USD.

European assets have enjoyed a stunning outperformance since October 2022. Can these strong returns last in 2023?

In <b><i>Part I</b></i> of a long-term series on currency valuations, we show that a simple PPP model has a good track record of predicting long-term currency returns (over 3-to-5 years).

In EM ex-China, growth will continue decelerating. Some economies will experience an outright recession, while most will have a growth recession. Nearly every single economy will experience a cyclical drop in inflation (with the exception of Turkey).

We remain bullish the yen, despite the BoJ maintaining yield curve control. In this report, we outline a few reasons for this stance.

We remain bullish the yen, despite the BoJ maintaining yield curve control. In this report, we outline a few reasons for this stance.

In this week’s report, we look at whether global growth conditions remain conducive for a continued decline in the dollar. Our findings are mixed, while there are some economic green shoots, the overall growth picture remains weak. This argues for some consolidation of dollar losses in the near term.

While the housing downturn will be fairly mild in the US, it will be more severe abroad. Continue to favor bonds of countries whose housing fundamentals will limit rate hikes.