Still on our way in May, watching for winners

Investing is a curious mixture of art and science. It is a world of phenomenally fast algorithmic trading, supplemented with old-fashioned sayings and adages concocted decades ago. Behavioural finance studies draw attention to the importance of ‘heuristics’. These are mental shortcuts or rules of thumb that ease the cognitive load in decision-making. The saying “sell … Continue reading “Still on our way in May, watching for winners”

Is the UK stuck in Brexit limbo?

The UK has been granted its second extension to the Article 50 deadline, averting a no-deal Brexit that would have happened on 12 April. The UK now has until 31 October to ratify the current Withdrawal Agreement, although there was some disagreement amongst other EU members as to how much longer the UK should be … Continue reading “Is the UK stuck in Brexit limbo?”

You still struggle to get an income on safer investments

The difficulties in getting a good return from Western nation bonds. The great crash of 2008-9 has left interest rates in much of the advanced world at very low levels. The fitful and slow recovery this decade has meant central banks have needed to keep rates low. Japan had a similar, if even more dramatic, … Continue reading “You still struggle to get an income on safer investments”

Does the US have enough firepower to fight the next recession?

With interest rates already near record lows, what’s left in the Fed’s arsenal to fight the next recession? Low starting interest rates means that the Federal Reserve (Fed) may need to expand its policy toolkit to fight an economic downturn. But if this proves insufficient, fiscal policy need to pick up the slack. The go-to … Continue reading “Does the US have enough firepower to fight the next recession?”

Avoiding a corporate bond liquidity squeeze

Since the global financial crisis in 2008, aging developed-world populations, record low deposit interest rates and quantitative easing by the world’s major central banks have driven a global ‘search for yield’ by investors. For many years, this drove asset yields lower across the risk spectrum. However, since the start of 2018 the investment backdrop has … Continue reading “Avoiding a corporate bond liquidity squeeze”

Inflation and capacity

There is a danger that central banks will tighten too much. Part of the market plunge during October was a response to tougher money conditions around the world. The Federal Reserve in the US is well advanced with a programme of rate rises. At the same time, it is supervising the rundown of its portfolio … Continue reading “Inflation and capacity”

How to survive a zombie company apocalypse

Zombie companies do exist but are not staffed by people that behave like extras in the “Walking Dead”. Actually, a zombie company is a technical term for a business which, if it is not yet numbered among the undead, is only earning just enough cash to pay the interest on its borrowings. It does not … Continue reading “How to survive a zombie company apocalypse”

Panic not: earnings season matters more than the current rout

Once again, markets are roiling. As with so many sell-offs, this is a story of pressure building steadily until it must vent. Volatile markets are here to stay, but the next few weeks will tell us whether this episode is a sign of something more ominous to come or just another bump in the road. … Continue reading “Panic not: earnings season matters more than the current rout”

Europe’s struggle to break free

At the start of 2018, it looked likely that interest rates could start to rise across Europe, signalling the end of the necessary post-crisis readjustment in the financial sector. However, as is often the case, the themes that drive markets at the start of the year can often be forgotten by the end. As 2018 … Continue reading “Europe’s struggle to break free”

What can we learn from the shape of the yield curve?

Surveys of investors show a distinct degree of nervousness this summer. One reason may be President Trump’s propensity for off-the-cuff Twitter activity, taking aim at Turkey, NATO, and Iran, the global trading system or any of his other enemies. Another explanation is rather more technical – prosaic, even. But it also illustrates how caution about … Continue reading “What can we learn from the shape of the yield curve?”

Turkey trouble: what’s behind it and what does it mean for emerging markets?

Turkey’s currency, the lira, has plunged 68% against the dollar since the start of 2018. Year-to-date its stock market has fallen nearly 18% and inflation hit 16% in July, more than three times the central bank’s target. Turkey’s current crisis has been a long time coming. The early warning signs were apparent in the 2013 … Continue reading “Turkey trouble: what’s behind it and what does it mean for emerging markets?”

New Fed chair Powell raises rates, growth and inflation forecasts

As expected the Federal Reserve (Fed) raised interest rates by 25 basis points at the March Federal Open Market Committee (FOMC) meeting. The move increases the target range for the federal funds rate from 1.25%-1.5% to 1.5-1.75%. At his first FOMC meeting, new Fed chair Jerome Powell also announced that the committee is pushing up … Continue reading “New Fed chair Powell raises rates, growth and inflation forecasts”

Down But Not Out

February started where January left off – providing investors with a timely reminder that global markets fall quicker than they rise. Strong US employment numbers and evidence of wage growth fuelled investor concerns over inflation and the prospect of a more aggressive US interest rate cycle. This led to a sharp sell-off in equity markets … Continue reading “Down But Not Out”

What Goes Up…

Some investors may be shocked that stockmarkets can go down considering the extended bull run we have seen in financial markets over the last couple of years. However, given that, as we write, major benchmark market indices are generally showing a decline of around 5% (in local currency terms) for the month; in context, this … Continue reading “What Goes Up…”