Results for search of category: Government Bonds

Shooting Bad Assets

If it’s not worth the risk, sell it. Risk-efficiency matters, especially as we move into the late-cycle. Assets which are not risk-efficient should be sold. Despite the significant increase in volatility, US and EM Equities are still far more risk-efficient than any of the mainstream US fixed income categories.  [Read More... ]

If You Have to Own Bonds…

All our tactical asset allocation models are close to maximum underweight in fixed income. If you have to have some exposure, our models are clear that the best overall strategy is momentum with a bias towards risk-aversion. Other strategies tend to lead to lower returns and larger drawdowns over the long term.  [Read More... ]

The Anti-Forecast

Investors don’t need to read the outlooks for 2018 to know that they are not being adequately rewarded for holding supposedly safe assets like US Treasuries. They are effectively forced into US and international equities, because the returns generated by traditional fixed income or alternative assets are unattractive in risk-adjusted terms.  [Read More... ]

What next for EM?

Three key messages for EM equities. (1) We expect to be underweight by early Q1 2018. We are already underweight EM in fixed income. (2) EM equities are not behaving like a single asset class at present. Only specialists should attempt to pick favourite countries. (3) The inclusion of China A shares in the main EM indices will force investors to rethink the way they allocate money, and they will be underweight while they work out what to do.  [Read More... ]

Walking, Not Charging

If we understand Janet Yellen correctly, there are no constraints in the real economy which critically affect the speed at which US interest rates can rise. But there must be a critical constraint, and we believe it is the requirement not to upset the low volatility environment in US equities. If we are right, the Fed wants an environment where single digit returns from equity are seen as risk-efficient, and a correction does not turn into a bear market. If they manage this, the bull market can carry on, but it will be walking not charging.  [Read More... ]

Euro-Schizophrenia

International investors are still in love with Eurozone equities, but the strength of the euro is starting to cause problems for domestic investors. The euro is probably overbought in the short-term, but further strength later this year would cramp Eurozone earnings growth in 2018 and tighten monetary conditions in which would allow the ECB to delay interest rate rises and shrinking its balance sheet.  [Read More... ]

Peak Euphoria

Our portfolio has had Eurozone Equities as its #1 position since the middle of March. We now see evidence of indiscriminate buying, with investors scrambling for exposure to the benchmark and not caring about sector or country tilts. Our exposure is now at a level which has only been matched three times by any equity region since the onset of QE.   [Read More... ]

Self-Help in Emerging Markets

It’s time to look at EM Equities again. Our view is that international investors should be selective and go for countries which are capable of self-help, like India, but not Russia. That means working with the preferences and opinions of local investors, not against them.  [Read More... ]


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