Category: Education

  • Another European Summer of Discontent

    | | ECB, Education, RMG Wealth

    The most obvious and immediate European problem is the UK’s Brexit vote on 23rd June, and momentum has clearly swung away from the remain camp in the last two weeks. What was seen as only a minor risk for financial markets has quickly become a huge potential risk and prices have begun to adjust. In our opinion, this is not just an issue of migration but a problem of the average man on the street simply does not feel that their lives have improved materially since the Global Financial Crisis. There are a huge number of voters who feel completely disaffected and simply want change. This is not an issue unique to the UK. Huge numbers across Europe and the US are in the same boat and the risk of a series of anti-establishment votes in the next year or so is growing … Read more Another European Summer of Discontent
  • Life Just Became a Lot More Difficult for the Data Dependent Fed

    | | Education, Federal Reserve, RMG Wealth

    After a truly disappointing US employment report, the market has priced out any rate hike in coming months, with only slightly more than a 50% probability of one rate rise by year end. In our opinion, Janet Yellen has always been a lot more dovish than a number of her colleagues and will not want to raise rates now. So, either the Fed ignores the poor US employment report (and the continuing weakness in the manufacturing sector and corporate profitability) and raise rates anyway, thereby risking upsetting the financial markets. Or, they shift back to a more dovish narrative, risking their credibility … Read more Life Just Became a Lot More Difficult for the Data Dependent Fed
  • When Interest Rates Rise From Zero

    | | Education, interest rates

    The general rule of thumb in equity investing is that you do not Fight the Fed, and there is a lot to be said for that thesis. Naturally, one has to respect the idea that higher rates provide more competition for equities in the traditional equity/bond portfolio, and vice versa when rates are low. I have actually spent, who knows how many, hours trying to model equities vs interest rates and I learned several lessons in the process. Primarily that rates high and rising are indeed not conducive to higher equity prices. However, rates low and rising are not as reliably equity unfriendly. And one can make a case that rates Low and rising are initially actually very good for equities. My studies suggested a high correlation between equities and rates when rates were high, not as much when rates were low … Read more When Interest Rates Rise From Zero
  • Markets Have to Adjust as Fed Alters Course

    | | Education, Federal Reserve, reflation, RMG Wealth

    The Fed’s normalisation process has been a tortuous on/off affair primarily because their focus has been almost entirely on not upsetting the financial markets rather than doing the right thing for the long term health of the US economy. This week, the Federal Reserve machine cranked into action to persuade markets that they want to raise rates before the Summer and again before year end. So far, the reaction has been quite muted, but it is far from certain that this calm veneer will continue. Let’s dive in and think about what the Fed are doing and what this means for markets … Read more Markets Have to Adjust as Fed Alters Course