Strategy

 

Strategy

Cloud gazing

All seems well with markets, but there are always clouds on the horizon. With price inflation remaining contained, one risk we think deserves more airtime is how a corporate margin squeeze could cause the next downturn. The next US Federal Reserve chair is also a mystery that could rock markets and President Trump’s objectives will be central to what candidates have to promise if they’re to get the big job.

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Strategy

Kabuki and Super Mario

There doesn’t seem to be much interest in Japanese investment ideas by foreigners, which makes me wonder whether we are collectively missing a trick. Whether you consider culture, technology, economics or social developments, Japan remains quite different from the western perception of what is mainstream. This makes it an interesting part of the investment universe as it could provide idiosyncratic, diversifying investment opportunities.

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Strategy

Off the record, on the QT, and very hush-hush

Quantitative easing is a bit of a puzzle. It doesn't work in theory, but appears to have worked well in practice. Should we be worried as that process now edges into reverse with the advent of 'quantitative tightening'?

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Strategy

Quantitative easing – no big deal for equities?

How much of where equities are today has come from quantitative easing (QE)? For a long time the answer to this question has not really been that important to equity investors. But now, with central banks moving towards shrinking their balance sheets, it’s a question equity investors can no longer ignore. My view is that QE may not have contributed much to the equity rally and therefore its unwinding may not be a major concern either.

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Strategy

Are equities too expensive?

After eight bull market years and with strong macro data all round, recession and bear market memories must surely be fading. Still, signs of exuberance or great bullishness are difficult to find; at most there is cautious optimism. Why? One of the most common push-backs against an equity bull case is that equities are too expensive. I can see where this concern comes from, but believe it’s something to push back against. Here are my top 10 points on equity valuations.

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Strategy

All roads lead to Rome

With the country saddled with high debt and unstable politics, Italian debt markets have persistently underperformed European averages for the last couple of years. This pessimistic narrative is definitely seductive but we believe it is dangerous to get sucked into an excessively negative outlook. The debt problems are chronic rather than acute, the politics are not obviously more unstable than usual, the ECB is being flexible with asset purchases, and the return potential could be greater than it first appears.

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Strategy

It’s difficult at the top

Markets are grinding higher and many investors are looking to call the top of the market cycle. In this light we ask ourselves what causes bubbles and more importantly how do we spot them? Over time I have collected a range of indicators that seek to have some predictive value in spotting bubbles emerging. I modestly call this the Heiligenberg Index.

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