U.S. 10-year treasury yield rose significantly (+60 bps) in October amid strong Q3/23 GDP, reaching as high as 5%, before abruptly reversing this week following favourable treasury funding plan, lower-than-expected ADP employment and non-farm payrolls, and unexpectedly weak ISM manufacturing PMI. This trifecta of good news for bonds has translated to U.S. 10-year yield fallingContinueContinue reading “Fiscal Dominance, Softening Employment and Manufacturing Relapse”
Category Archives: Research
The Big Picture: Economic Cycle and Market Mean-reversion
The structural decline in long-term yields since 1980 until the covid-19 pandemic had been accompanied by investors complaining that the search of attractive investment opportunities was becoming more difficult over time. The decline in borrowing cost also has a significant ramification for global investors, including boosting stock buyback amid lack of investment opportunities, breeding ofContinueContinue reading “The Big Picture: Economic Cycle and Market Mean-reversion”
Ten Predictions for 2023
This year has been particularly difficult for most investors as there are few places to hide from inflation and rising cost of capital. Both equity and long-term bonds are down over 20% YTD, and even the value of cash is being eaten out by inflation, which rose as high as 9.1% y/y back in June.ContinueContinue reading “Ten Predictions for 2023“
Lessons from Japan: Automation and Reshoring of Supply Chain
Download PDF: automation-and-reshoring-of-supply-chainDownload There are two main drivers of global deflationary trend in the past 30 years: rising global trade allowed by the shift towards greater openness in China and former Soviet countries and the explosion of productive-age population facilitated by the baby boomer generation (Chart 1). In 1989, the wage gap between the developedContinueContinue reading “Lessons from Japan: Automation and Reshoring of Supply Chain”
U.S. Equity Strategy: Sector Selection Amid Slowing Global Growth
Download PDF: us-equity-sector-strategyDownload The 2021 post-pandemic recovery has been impressive, with record amount of fiscal stimulus propping up household spending and the corporate sector turning into a capex hyperdrive. Meanwhile, the Fed maintained an ultra-loose monetary policy and tilted toward the dovish side in the first half of the year, which fuel the froth andContinueContinue reading “U.S. Equity Strategy: Sector Selection Amid Slowing Global Growth”
Positive on Russia, Neutral on Mexico
Download PDF: russia-and-mexico-2021q4-pcDownload Remains Overweight Russia Russia and other oil-exporting countries historically perform poorly during a global slowdown, but tighter discipline among OPEC+ and shale producers since last year has bolstered oil prices to above $80/bbl, which creates a positive spin for energy producers. We have been constructive on Russian and energy sector since lastContinueContinue reading “Positive on Russia, Neutral on Mexico”
Negative Outlook: Chile, Peru and Brazil
Download PDF: brazil-chile-and-peru-2021q4-pcDownload Downgrade Chile and Peru to Underweight Our recommendation to trim exposure to Chile and Peru is driven by three things: downside risk in copper price, rising political risk, and aggressive tightening by both countries’ central bank. Slowdown in Chinese growth is going to weigh on commodity intensive Latam bourse heavily through theContinueContinue reading “Negative Outlook: Chile, Peru and Brazil”
Chinese and Asian High Yield Corporate Bonds: Feeling the Heat
The jitter surrounding Evergrande’s solvency problem has spread to other Chinese property developers that account for sizeable portion of Chinese and Asian High Yield Corporate index. Chart 1 and 2 show spreads of Chinese and Asian USD bonds have widened to 16% and 11.5%, respectively, while the total return index declined 18% and 12% fromContinueContinue reading “Chinese and Asian High Yield Corporate Bonds: Feeling the Heat”
USDBRL – Better Entry Point Ahead
We are currently cautious on the BRL. Although valuation is cheap, deceleration in global growth and rising downside risk for global equities and commodities mean there will be a better entry point to short USD/BRL. Shorting EUR/BRL is a more attractive trade given the risk of a stronger dollar in such macro environment. First, theContinueContinue reading “USDBRL – Better Entry Point Ahead”
Central and Eastern European Countries: Rising Rates Will Lift All Boats
Download PDF: central-and-eastern-european-countries-202109-pcDownload Central banks in Czech and Hungary have begun to raise their policy rate this year amid acceleration in inflation as their domestic recovery unfolds, creating a tailwind for the koruna and forint against the Euro, which will not see the ECB raising its borrowing cost anytime soon (Chart 1). With Central andContinueContinue reading “Central and Eastern European Countries: Rising Rates Will Lift All Boats”
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