Gov Sovereigns/Treasurys
In July, the model outperformed both global equities and the S&P 500 in local-currency terms, while underperforming in U.S. dollar terms. For the monthly of August, the model made no changes to overall risk exposure.
The contours of a deal to solve Italy's banking problems are starting to emerge. This is good news for European risk assets. Nevertheless, reviving Italian growth will require even more ECB easing. The appetite for radical measures is low at present, but this will change if euro area growth remains lackluster and efforts by Japan to introduce helicopter money policies prove successful.
The recent rally in risk assets is walking a very fine line. If the Fed turns more hawkish, or U.S. growth slows, it could fall over.
The 35-year bond bull market is coming to an end and the downward sloping trend channel for yields is changing to flat. Asset allocators should trim duration and fixed income exposure.
The ongoing stampede into EM bonds is unsustainable. Running away from G7 bonds does not necessarily entail buying EM bonds. These are two separate investment decisions. Lower commodities prices, weaker EM currencies and higher G7 bond yields will undermine EM bond returns going forward. A new relative bond trade: long Polish and Hungarian 5-year / short South African and Turkish 5-year local bonds, currency unhedged.
This week, we are sending a <i>Special Report</i> written by BCA's Chief Global Strategist Peter Berezin, discussing the end of the 35-year global bond bull market. In addition, we are also sending you a joint <i>U.S. Bond Strategy/Global Fixed Income Strategy Weekly Report</i> which discusses the end of the secular bond bull market and the implications for global bond strategy.
This week, we are sending a <i>Special Report </i>written by BCA's Chief Global Strategist Peter Berezin, discussing the end of the 35-year global bond bull market.
The major banks are more willing to lend to the consumer and less willing to lend to the corporate sector.
In successful investment analysis "less is more, and usually much more effective."
There has not been much of an improvement/recovery in the Chinese economy. Credit growth is weakening anew, which warrants a downbeat cyclical outlook for China's industrial sectors. Malaysia is heading into a classic credit/banking downturn. Go short Malaysian banks stocks and short the ringgit versus the U.S. dollar. In South Africa, take profits on the yield curve flattening trade. Continue shorting the rand versus the U.S. dollar.