Results for search of category: Energy prices

Three Ideas from the US Senate

Elections don’t change things, except when they do. The combination of the Saudi oil cut and Democrat control of the Senate could usher in a period of materially higher oil prices. The Senate victory also means that social media companies may be threatened with more regulation and even a possible break-up. But does the new administration have the political capital to take on Big Pharma at the same time? The outlook for the Healthcare sector may be more hopeful than the Blue Wave doomsters suggested.  [Read More... ]

Income in Dollars, Please

Generating an adequate income from euro-denominated bonds is next to impossible, so investors should abandon the attempt. They should embrace currency risk – not try to hedge it away. They should enjoy the fact that US dollar yields are structurally higher than those in the Eurozone. This means owning long-dated Treasuries and dollar-denominated EM sovereign bonds. Finally, they should consider the source currency of their equity dividends and take another look at the Energy sector.  [Read More... ]

One Disease; Three Themes

Three interesting ideas emerge from our regular reports. First, the volatility shock will almost certainly be as bad as 2008. Second, we believe that a long Technology /short Energy trade will have a positive pay-off no matter whether equity markets rise or fall. Third, our models are increasing exposure to EM Equities. We recognise this is a contrarian trade, but it is well-supported by our process and doesn’t depend on one or two countries.  [Read More... ]

Is Energy Un-Investable?

Nobody likes the Energy sector. On a global basis the current sell-off is as bad as all the other major declines, apart from 2014. The difference is that oil prices are much more stable now than they were then. The medium-term challenges (ESG agenda, electric cars, balance sheet distress) are all well-known, but we would be really surprised if the sector wasn’t rated overweight again within the next two years – any maybe sooner.  [Read More... ]

Credit Wobble

High Yield has peaked in our fixed income models and has fallen sharply against Investment Grade. We have checked our cross-asset sector models and it isn’t caused by a problem in Energy. It looks like a straightforward loss of confidence in the outlook for Industrial High Yield. This is potentially ominous for Equities as well, but we haven’t generated a sell signal just yet.  [Read More... ]

Whistle-Stop Tour

We finally have the bounce in risk assets that we expected in the run-up to Christmas, but it is not yet strong enough to break any of the downtrends that developed earlier in Q4. We are at maximum underweight in all our equity vs bond models and similar levels of risk aversion apply in our fixed income and equity sector models. The only exception is that we have an overweight on Emerging Markets in our global equity model and may be about to downgrade the US to underweight.  [Read More... ]

Few places to hide

UK portfolios could be vulnerable to rising oil. We are concerned that oil may be entering a new trading range which could damage a conventional balanced portfolio. We look at two correlations: between equities and bonds and between oil futures and a balanced portfolio. In the Eurozone, investors don’t really need a hedge. In the US, it may be “nice to have”, but not essential. In the UK, equities and bonds are positively correlated at the highest level since 2001, which means that investors need some sort of hedge, even though we can’t yet be sure that oil is the right on.  [Read More... ]

Time to Worry About Oil

Energy ETFs may be worth the risk. Crude oil may be breaking out of its trading since 2015, even if we allow for the weakness of the dollar. It’s time to ask how high it can go, and what this would do your portfolio. Beyond an overweight in the global energy sector and exposure to the right part of the US high yield market, it’s time to think about direct investment in the commodity itself.  [Read More... ]


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