Correlations

Highlights Dear Client, This week's BCA's Commodity & Energy Strategy features our 2017 Outlook for the Gold market. We will address the other precious metals markets early in the New Year. We model gold as a currency. While fundamental data - supply…

Highlights This week we elaborate on the issues that we believe will be critical to investors going into 2017: Feature 1. Is China beginning to export inflation? Not yet. As long as the RMB depreciates faster than the rate of domestic inflation, China…

Highlights Portfolio Strategy If the Fed is about to begin interest rate re-normalization in earnest, then investors should heed the message from historic sector performance during tightening cycles. The tech sector remains vulnerable to tighter…

Highlights The Chinese authorities have progressively tightened capital account control regulations to staunch capital outflows, which will likely slow the drawdown of the country's official reserves in the near term. Rising yields in China are largely…

President-elect Trump and the specter of his spendthrift policy proposals have generated significant client interest/inquiries on equities and inflation - not asset prices, but of the more traditional kind: consumer price inflation. Chart 1 shows that a…

Highlights Trump is adding stimulus and potential rigidities to the U.S. economy as the labor market slack vanishes. This evocates the 1970s and stagflation. This risk could resonate among investors as there are enough similarities with the late 1960s /…

Highlights U.S. bond yields and the U.S. dollar will rise further. Consistently, EM currencies and local bonds will continue selling off. There is meaningful downside in EM exchange rates. We recommend short positions in the following basket of EM…

Highlights Portfolio Strategy The rise in Treasury yields is approaching a threshold that has often caused equity market indigestion. Stay focused on current monetary conditions rather than fiscal unknowns. The bear market in lodging stocks has played…

Highlights Commodity prices and the dollar can occasionally rise together. The 1999-2001 and the 2005 experiences suggest a supply shock is required. If commodities were to rally alongside a strengthening dollar in 2017, this would be an oil-led move.…

Highlights The basic conditions that the U.S. Treasury utilizes to evaluate its major trade partners do not justify labeling China as a currency manipulator. Even if China were officially declared as a manipulator, the remedial measures that the Treasury…