Global
Smart beta strategies can be useful in both strategic and tactical asset allocation. Combining different smart beta strategies can smooth out the cyclicality of individual strategy and provide a better return/risk profile.
Our strategic and tactical trades were up an average 24.6% in 2016Q2, led by strategic energy recommendations. Going forward, we continue to favor energy exposure over base and precious metals, ags and softs.
A number of divergences have emerged in global financial markets. These gaps are unsustainable. The recent improvement in Asian trade/manufacturing has been largely due to firming demand for electronics/semiconductors. Meanwhile, demand/output for industrial goods and basic materials - the areas leveraged to Chinese capital spending - remain weak. Fixed-income traders should bet on yield curve steepening in India: receive 1-year/pay 10-year swap rates.
For the month of June, the model performed in line with both global equities and the S&P 500. For the month of July, the model is increasing its risk exposure.
This <i>Special Report</i> looks at global equity valuations. The conclusion is that although most equity markets are far from cheap, some compelling investment opportunities do exist.
Post-Brexit uncertainty will continue for some time. But we were already cautiously positioned, and would not go any more defensive.
The Brexit vote has ended the reflation trade, but does not represent a "Lehman moment" either. Stick close to benchmark in terms of broad asset allocation, and watch European bank CDS for signs that another financial crisis is brewing.
Rising policy uncertainty is negative for global equity multiples.
Equity and Treasury market positioning support the notion of a bounce in risk assets, possibly egged on by dollar weakness.
Among the myriad of troubling signs for the global economy, some developments on the inventory and deflationary fronts could point to a brighter future. While still not our base case, those factors need to be monitored. With Brexit over and done with, we are reshuffling our GBP portfolio. Remain bullish EUR/USD. Go short CAD/NOK.