Global economy in 3GD mode

By the end of August almost all major asset classes had posted positive returns for the year, of between 2% and 15%. With an increasingly gloomy outlook, even for the Chinese locomotive, many observers find this performance puzzling.The answer to the markets’ performance lies mainly in how implicit expectations for growth and inflation have evolved […]

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EU summit not a real game-changer

We have only just avoided the worst.The tilting of the Franco-German axis in favour of France after the change of power in Paris was used to extract a vague agreement at the EU summit on 28 and 29 June.The deal is long on promises and short on details. As always, the devil will be in […]

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Ugly divergence in Europe vs. the Great Deleveraging in the US

Alpha can be deined as the extra return generated from actively managing an asset class compared  to the return secured by straightforward passive management exposure to an asset class. As, by their very deinition, aggregated returns obtained by all investors collectively must be equal to the return on the market overall, alpha is tantamount to a zero-sum game. Put simply, […]

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Deleveraging forces at work in the background

The first quarter of 2012 ended on a uniformly positive note for risk assets.They were given a boost, initially, by the European Central Bank’s 180-degree shift to an activist approach to monetary policy, and then by persistent and carefully stage-managed rumours of a third round of quantitative easing by the US Federal Reserve. By no […]

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Central banks’ coincident quantitative easing

By shifting from an allocation structured on the basis of asset classes to one organised along the lines of strategies and risk factors, we are in effect choosing to focus on three very distinct categories of equities. First, at the strategic allocation level, we distinguish between defensives and growth stocks. Second, for the portion of […]

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ECB pumping out fresh liquidity and hope

The first of November 2011 will probably come to be seen as a key crossroads in the eurozone crisis – the momentwhenJean-ClaudeTrichethandedthehelmof the European Central Bank on to Mario Draghi.The final year of ECB President Trichet’s term of office only served to confirm what we had been criticising for a number of years: pursuit in […]

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Non-normal is the new normal

The world has changed dramatically since 2008. The initial financial crisis, rooted in housing-market bubbles, especially in the US, and all the toxic assets acquired lock, stock and barrel primarily by the world’s leading investment banks, degenerated into a debilitating crisis of confidence worldwide with its epicentre in Europe: distrust initially of the banks, then […]

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2012: mixed outlook of reflation hopes and deflation fears

In arriving at scenarios for our tactical asset allocation for 2012, our team of macroeconomic analysts have sought to evaluate how the main asset classes are likely to perform depending on differing levels of volatility. Volatility is generally expressed in terms of theVIX Index that measures expected volatility on the S&P 500, the index of […]

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