Investors are in a massive search for carry as an increasing percentage of the bond markets is generating negative yields. This, amongst other factors, has fuelled huge inflows into emerging market debt (EMD). We are long hard currency EMD and the position has benefited from this search for yield. We wonder, however, has EMD now become too expensive?
This summer saw “Cheerleader” become Billboard's top hit, the return of the jumpsuit for women and ‘monochrome’ outfits for men. Unfortunately most fund managers haven't been able to enjoy these trends as August stocks saw their worst performance since 2011, it was pretty much all hands on desk.
Some of the readers of Macro Matters have asked me whether I had perhaps written the last one, “The good and bad of low growth”, from a remote island during one of my shark diving trips, completely separated from markets, as I didn’t explicitly comment on all major events and headlines.
Having been neutral equities since early May, we cut back to a tactical underweight last week. The rationale for that risk reduction was essentially two-fold: material short-term from both the Federal Reserve and Greece. The position has not changed, but there has been news on both front...