The Trump reflation trade may have lost some of its shine during the quarter, but any disappointment was more than overshadowed by strong global data as exports and production continued to gather pace. In fact, fading enthusiasm for Trump’s ability to execute has arguably served as a tailwind for Emerging Market (EM) assets in the form of a weaker dollar and moderating long term rates.
With President Trump announcing that he will be releasing his tax plans in the coming weeks, we have shifted to a more cautious position on US duration. The risk is that President Trump announces a sizeable stimulus package, with the backing of the broad Republican base. This would raise fears that the US Federal Reserve would need to act more quickly than expected, and with markets only pricing in two or three rate hikes in 2017, we believe that markets are under-pricing the risks of this announcement.
2016 may best be remembered as the year in which Trump won and the world changed. The question becomes which reforms will take centre stage.
Donald Trump has won and the world has changed. A real estate developer cum reality TV star will soon be the leader of the free world.
Emerging markets (EM) have endured strong adjustments in commodities and currencies that coupled with reforms makes a good case for better growth ahead. Still, it will take time for EM to navigate to more stable sources of growth, requiring relative stability through the delicate transition.
As we enter the final quarter of 2016, concerns around political risk are at an uncomfortable level. October saw further volatility in the UK Pound, as negotiations around Brexit drove the currency to its lowest level in over 30 years.
Since the 2008 financial crisis, markets have become accustomed to central banks calling the shots. Investors eagerly await each central bank meeting in the hope some new form of monetary policy chicanery can help propel markets higher.
Another summer has passed in the northern hemisphere and any Brexit-related jitters appear a distant memory. Global equities have rallied almost 10% since the June lows, with most markets now in positive territory for the year.
We expect a raft of populist policies to appease the disaffected masses whose voice had not been given attention until Brexit. What is clear is that markets currently place the level of possible success at zero. Defensive trades are more crowded than ever.
The UK's late June vote in favour of 'Brexit' was initially read as a deep negative, particularly given that markets were priced strongly in favour of a 'Remain' vote. However, after brief reflection, markets outside the region saw a rally, with risk asset performance more than making up for Brexit losses. Emerging markets have been a primary beneficiary...
We have been concerned for some time that the disillusioned middle class would eventually rail against the existing establishment and the set of policies they feel are responsible for leaving them behind. Brexit would appear to be more the start than the end of reconciling these differences.
We believe that the latest experimental monetary policy to do the rounds of central banking rhetoric—‘helicopter money’—may actually prove effective. But it comes with significant risks.
Not just a European phenomenon, the anti-establishment vote is gathering momentum globally. Donald Trump has surged to the Republican nomination in the US on the back of a groundswell of disillusioned middle class voters.
Success in investing can sometimes be as fleeting as the 1000-year old Japanese custom of 'Hanami' — the despair of January was quickly replaced by the euphoria of February and March. However, last year's winners have become this year's laggards.
2016 began in complete panic, with risk assets including emerging markets selling off deeply through the first few weeks of the year. This was then followed by the strongest rally since 2012.
In early 2016, hedge fund Nevsky Capital decided to call it quits after 15 years of successful asset management. One of the reasons for the closure is that since the global financial crisis, emerging markets are breaking away from the transparent 'Washington Concensus' model.