Eurozone Crisis – Harlyn Research LLP

Discontinuity Rules

Friday, March 18th, 2022

A lot has changed but not everything that should have

If the fall of the Berlin Wall was supposed to be the end of history, the invasion of Ukraine may well mark the rebirth of geography in investment markets. Equity returns in Europe are being impacted by country specific factors beyond the usual mix of sector effects. We see the potential for new definitions of core and periphery in Eurozone bond markets and there are many emerging equity markets in Latin America and SE Asia which are not affected by the war, even the asset class as a whole is (China, Russia, Eastern Europe). The thing which hasn’t changed is the momentum of US earnings growth.

Filed under: Categories: Emerging Markets, Eurozone Crisis, Geo-Political Risk

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Income in Dollars, Please

Friday, April 17th, 2020

Time to look at European Energy equities

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.

Filed under: Categories: Corporate Bonds, Dividends, Energy Prices, Eurozone Crisis, FX rates, Government Bonds, Tail Risk

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The Calm Before the Storm

Thursday, March 7th, 2019

Concerns over US earnings, China slowdown, Euro banks

Before the ECB’s announcement today, nothing very important had happened in financial markets for several weeks. We get nervous when it’s this quiet, so we prepared a list of issues to worry about. They range from the benign, like a melt-up in risk assets caused by a sell-off in US Treasuries to the borderline catastrophic, like a Eurozone banking crisis. Our main point is that the current directionless environment is likely to end in the near future. Whether investors believe in any, or all, of the scenarios listed below is up to them.

Filed under: Categories: China, Elections, Eurozone Crisis, Financials, Market Timing, United States

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Eurosceptics may win EU elections

Thursday, October 11th, 2018

A black swan for 2019

We take recent opinion polls for each political party in each country in the EU and compare them with the share of vote and the number of seats they won in the EU Parliamentary elections in 2014. We conclude there is a good chance that Eurosceptic parties may form the largest single grouping after the elections in May 2019. We believe that this scenario has not even been considered by most investors and that it has significant shock value. Some may even regard it as a black swan.

Filed under: Categories: Equities, Eurozone Crisis, Geo-Political Risk

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Political Risk in Europe

Wednesday, November 23rd, 2016

An Investor’s Guide

We all wonder what happens if the Italian government loses the constitutional referendum on December 4^th. Most investors understand the negative implications for France, but our analysis suggests that Belgium would also suffer badly. Germany is our preferred safe-haven, but our second choice is Spain.

Filed under: Categories: Equities, Eurozone Crisis, Geo-Political Risk, Government Bonds

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Our President, Your Problem

Wednesday, November 16th, 2016

Japan is least impacted by Trump’s election

Last week we focussed on the prospects for CNY USD exchange rate in the wake of Mr Trump’s election. This week we add falling EM equities, unstable asset allocation models and rising political risk in the Eurozone to the list of issues which confront international investors. We also note that Japan is hardly affected by any of them.

Filed under: Categories: Eurozone Crisis, FX rates, Geo-Political Risk, Japan

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Catastrophically Awful

Wednesday, July 13th, 2016

Eurozone banks are in crisis NOW

The scores for the Financials sector in our Eurozone and Pan-European equity models are catastrophically awful – as bad as those for US Financials at the onset of the Lehmans crisis. The only possible conclusion is that the Eurozone financial crisis has already begun. The three large banks with the worst individual scores are Unicredit, Intesa and Deutsche Bank.

Filed under: Categories: Corporate Bonds, Credit Quality, Equities, Eurozone Crisis, Financials

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