Banks

Highlights Downside risks to EM assets remain substantial. Stay put. EM stocks, credit and currencies will underperform their DM counterparts in the first half of 2019. The key and necessary condition for a new secular EM bull market to emerge is the end of abundant financing. The latter is…

Highlights The Reserve Bank of Australia (RBA) may consider a rate hike in 2019 if additional tightening of labor markets leads to higher wage inflation, which would help lift core inflation back to the midpoint of the RBA’s 2-3% target band.  Reflation in China could also embolden the…

Highlights On a 6-month horizon, go long a combination of banks and high quality 10-year bonds. The recommended combination is 25 cents in the banks and 75 cents in the bonds. The preferred banks are European or euro area and the preferred bonds are U.S. T-bonds. Stay short oil and gas versus…

Highlights Turkish commercial banks have been ramping up purchases of local currency government bonds. Given that commercial banks create new money “out of thin air” when they buy assets from non-bank entities, should investors interpret this phenomenon positively or negatively? Under the…

Highlights Bond yields have trapped equities, and equities have trapped bond yields. The double-digit investment opportunities are within asset-classes. From a tactical perspective: Banks will outperform the broad market. EM will outperform DM. The Eurostoxx50 will briefly outperform the S…

Feature In the late 1980s, half of the global stock market capitalization resided in Japan Furthermore, almost a third of the Japanese stock market capitalization resided in banks. It followed that to have a view on the global stock market you had to have a view on Japanese banks. Indeed, in…

Highlights Five risks to our bullish dollar stance need to be monitored: further weakness in the S&P 500; rebounding gold prices; stabilizing EM exchange rates and bond prices; Spanish bank stocks at multi-decade lows; and large, long-exposure by speculators to the greenback. However,…

Overweight - Downgrade Alert Between Friday of this week and Monday of next, roughly 75% of the S&P banks index, representing the nation's largest lenders, will be reporting their Q3 earnings results. Our loan growth and earnings models continue to point significantly higher, particularly…

Highlights Set your overall investment strategy with two 'rules of 4' based on 10-year bond yields: If either the Italian BTP or the sum of the U.S. T-bond, German bund and JGB stays above 4 percent, then sell equities and buy bonds. If both the Italian BTP and the sum of the U.S. T-bond,…