Asset allocation decisions are best not made in a vacuum and thus a major consideration when investing internationally is the currency risk one is willing to accept (assuming unhedged positions). In today’s world of zero interest rates, the dominant factor in currency movements seems to be…
Read MoreEconomy
Today’s cyclical jolt aside, it appears from glancing at relative performance charts of growth counter-cyclicals (our code wording for the Consumer Staples and Health Care Sectors) that they could be poised for a relative performance breakout. Indeed, in all major regions of the world, growth…
Read MoreGentle Reminder of why the Chinese Economic Model is not Long-term Sustainable June 18, 2015
Posted by in Economy
These statistics are not really news, but we thought we’d just remind readers of the perils of the Chinese economic model in its current state. In a simple phrase: Chinese debt is not getting the proverbial bang for the yuan that it used to. What…
Read MoreInflation Expectations Are Turning Back Over In The US May 28, 2015
Posted by in Economy
TIPS derived breakeven inflation expectations have started to fall once again in May. For a little context, starting in last June, breakeven inflation started a steady march lower that lasted until January of this year. Since that time, we have seen a rebound in inflation…
Read MoreCan Crude and Copper Keep Rallying with China Slowing? May 14, 2015
Posted by in Economy
Yesterday saw the monthly slue of Chinese economic stats and the key feature among them was the continued broad-based weakness. The weakness in some of these statistics has been so pronounced (some things like IP and retail sales are at levels near or below those…
Read MoreLong-End Of US Yield Curve Suggests A Stronger Yen May 13, 2015
Posted by in Economy
The relationship between the Japanese Yen and the spread between the US 30-year treasury yield and US 10-year yield has had a very tight negative correlation (-0.85) over the past 10-years (since 1986 when the bond spread series begins the correlation is -0.61). Since the…
Read MoreHas Sales Growth Peaked for the Cycle? May 11, 2015
Posted by in Economy
Sales growth estimates for companies around the world began sliding towards the middle of 2014 as the price of oil began its months-long setback. In the first chart below we show the average and median company’s next 12 month sales growth estimate for the MSCI…
Read MoreTotal Assets At The Fed At Six Month Lows May 04, 2015
Posted by in Economy
The quiet, subtle decline in the Federal Reserve’s balance sheet continued in April. As of May 1st, the Fed’s balance was at $4.47 trillion. While undoubtedly still incredibly large, the Fed’s balance sheet is about $45 billion less than its peak level on January 16, 2015.
Read MoreEconomic Releases Are “Missing” In The Two Largest Countries In The World May 04, 2015
Posted by in Economy
The US and China are not hitting their economic numbers of late according to the Citi Economic Surprise Index. The economic surprise index in China has recently fallen to 10-month lows. In the US, more economic releases are coming in below expectations than are beating expectations over the past few months.
Read MoreNYSE Margin Debt Charged To New All-Time Highs In March April 30, 2015
Posted by in Economy
After spending the past year somewhat ranged bound, margin debt increased by just under $11.5 billion in March to a new all-time high of $476 billion, taking out the previous high set in February 2014. The increase in margin debt over the past two months is the largest two-month increase since February 2013.
Read MoreThe Step Down In Long-Term US Growth Rates Breaks Lower April 29, 2015
Posted by in Economy
From 1974 to 2007, the long-term US growth rate in real GDP generally fell between 3-3.5% on annualized basis (excluding the v-shaped bounce from 1982-1984). We define long-term here by looking at the 10-year annualized percentage change. With the 1Q now in the books, this series just dropped to an all-time low of 1.46%.
Read MoreFinancial Conditions Tighter Now Than At Any Point Since 2009 According To Chicago Fed April 20, 2015
Posted by in Economy
We won’t know how the first quarter officially ended for another nine days but the Chicago Fed just gave us a hint that it will be below trend growth. According to the Chicago Fed National Activity Index, the three-month period ending in March just posted the slowest growth since October 2012.
Read MoreInflation Expectations & Relative Performance April 14, 2015
Posted by in Economy
For about six weeks, between the middle of January and the first week of March, inflation expectations embedded in the US Treasury market bounced after declining for the second half of 2014.
Read MoreHow Much Lower Can The 30-Year Treasury Yield Go? April 13, 2015
Posted by in Economy
Three weeks ago we mentioned how Fed assets were finally declining on a quarterly basis. Since then we have had a few more data points released and the trend is still downward.
Read MoreWhere Positive Economic Surprises Are (And Aren’t) Happening April 10, 2015
Posted by in Economy
There is a geographic disparity amongst the Citi Economic Surprise Index. Economies, both developed and emerging, are surprising to the upside in Asia and Europe while economies in the western hemisphere are not doing as well (at least in terms of meeting and exceeding expectations). Below we show some of the more interesting charts.
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