Results for search of category: Real economy

How Low Do We Go?

Our asset allocation model cannot get much more bearish. In our view the reason for the recent weakness has been the need for US equities to adjust to PE ratios in line with their long run average now that everything else - real interest rates, risk conditions and earnings growth – is also approaching its own average. We are less concerned about the prospect of a US recession, partly because we see no warning signs from the credit markets. Our model is unlikely to get more optimistic in the next six weeks, but this may happen just in time for Christmas.  [Read More... ]

Lost in Translation

There is a fundamental conflict between the bearish sector stance of our Chinese equity sector model and the bullish positioning of the US model. We don’t think it is possible for these two sets of sector recommendations to remain unchanged without having an impact on each other or the rest of the global equity universe. On balance we think it is more likely that the US will come to resemble China, rather than the other way around.  [Read More... ]

Who Sets the Weather?

We may be about to witness a live experiment as to who sets the weather for global equity markets. Is it monetary policy in the US? Or is it the real economy in China? Conventional wisdom says it will be the US, but investors should know that our sector-based cyclical vs defensive indicator in China has started to move towards defensives.  [Read More... ]

Panic Button

The ECB’s initiatives last week were complex and not very effective as far as the economy is concerned – unless it’s exchange rate which is the real policy target. In this case the announcements have already had an effect and the scale of the adjustment could be much larger than many investors think. If it’s the first, US investors should significantly underweight all European equities. If it’s the second, they should be overweight in the Eurozone only, but with a full currency hedge.  [Read More... ]

When the Fed tapers

Whenever it comes, the taper will have many unintended consequences. We foresee a period of considerable difficulty for asset allocation, but certain impacts on the real economy may be actively beneficial. Companies may have more capital to invest, and consumers may have more discretionary spending power.  [Read More... ]

    Full Blog Archive:

  • Search Blogs by Category