/ 1 Jun 2020
Of course! "I'm 'rotating' out of debt, using my 'cash on the side-lines', into an 'under-owned' market"...of course! "Why is the US Equity market going up?", you ask. Simple, it is because here is a pile of 'cash on the side-lines' that is flooding into the market, along with others 'rotating' out of low yielding bonds into equities all because the equity market is 'under-owned'! It all sounds very convincing, so convincing in fact that I'm hearing it from lots of people on all sides. So, excuse me if I choose not to follow that narrative but prefer something a little more logical and factual.
/ 28 May 2020
What did Funds Buy and Sell during the 1Q? Over the last couple of weeks, “13F” filings from the largest funds were published in the US, which gives us a snapshot of the stocks owned on March 31st by some of the largest funds. In our opinion, the information is useful since it gives clients a view into what some of the largest funds have been doing in the current volatile environoment. There are some limitations on this data since it is delayed by almost fourty five days. In addition, this is an incomplete picture as many funds are not required to disclose their short positions, and some exceptions allow funds not to disclose certain holdings (activist shareholders can delay their filings). Lastly, funds can appear to own a stock, but in reality the investment is hedged.
/ 18 May 2020
Banking on China..? When Chinese Growth data are compiled at a local level, by politicians explicitly incentivized to deliver good news, and then added up at the National level to satisfy political leaders and their desire to cement their power with good news, it is hardly surprising that very little bad news ever escapes the Chinese vacuum. Indeed, the Brookings Institution showed this last year (see "A Forensic examination of China's National Accounts," March 2019, Wei Chen et al.)
/ 11 May 2020
The UST yield curve slope traditionally compares the difference between longer-dated tenors with very shortterm bond yields, like 10 and 2 years. Essentially, the slope shows the difference between the expected future state of the economy, reflected in 10Y UST yield, and shorter-term maturities, which are driven by more immediate economic conditions and associated with monetary policy. The UST maturity spread is signaling the relative perception of economic vitality and pricing power (i.e. capacity to increase prices as reflected in inflation) between the medium-term against more immediate conditions.