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5 December 2016

You can’t be given a bloody nose twice.

The vote ‘no’ to Italian constitutional reform in this Sunday’s referendum has cost the Italian prime minister Renzi his job and perhaps thrown the Italian government into turmoil. Markets are however not in turmoil. The euro is close to unchanged, having fallen modestly after the referendum result. European equity markets are sharply higher this morning. While Italian 10y government bond yields have breached 2%, this increase in yields is notably less sharp than at the time of Trump’s election. Investors who panic sold after Trump and Brexit have been reconditioned (correctly in our view) to not immediately re-price risk on the back of specific political events.

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10 November 2016

Trump’s double surprise.

It is quite clear that in the days leading up to the U.S. Presidential election, both markets and surveys got it wrong. Traditional polling once again failed to spot the depth of support for radical political change. This was after all the U.S., which has delivered the strongest post-crisis economic performance of any developed nation. 

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RSS - Strategic Insight
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*Multiple Sectors
29/11/2018
Equity strategy and market outlook - November 2018

In this month’s strategy piece, Alastair George believes that 2018 has been the year that the US Fed normalised US monetary policy. Evidence of this is in the restoration of normal market volatility, lower global equity valuations and a strong US dollar, in addition to higher US interest rates. With Fed chair Powell suggesting in recent days that US rates are just below the broad range of the Fed’s estimates of the neutral level, expectations of a pause in US rate increases have risen, even if this observation is only consistent with previously published Fed projections. Even given the possibility of a further easing of Fed rhetoric in coming weeks, the investment outlook remains difficult to read in our view due to key political risks directly ahead, the most significant of which are the potential for a no-deal Brexit and US trade policy with respect to China. On balance, earnings risk keeps our cautious view on global equities in place. We are mindful of the 2015 experience where the resources and energy sectors continued to decline despite attractive valuations, until earnings forecasts stabilised. We can also see the relative merits of a risk-free 2.8% annual return on US two-year Treasury notes in the circumstances.

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