On some indicators equities look expensive – the CAPE ratio is the highest since the dot.com boom. But with interest rates at multi-decade lows, shouldn't equity earnings yields be low too? Rising interest rates pose a threat to valuations, but models suggest this could be offset as long as recession fears remain low.
‘Less is more!’ That is what correlation wants to brag about to enhance diversification. However, following the financial crisis, many believe that correlations are at an all-time high – is this the end of low correlations? We think not.
With 2017 now upon us, it’s clear that a new political paradigm has emerged. The prominence of Brexit, Trump, Le Pen, Corbyn, Alternative for Deutschland and many others is not the result of idiosyncratic national political issues; it reflects a systemic political shift. Given this shift, is it possible for investors to find inner peace?
"Ain't nothing over 'til it's over" Sylvester Stallone sagely stated in the film Rocky Balboa. Much like a 21st century Rocky, long after his heyday in the 70s, we question OPEC's ability to rule oil markets. OPEC now hope to have hit a knockout blow that will raise prices and solve the excess supply problem. But this isn't the 70s and the cartel isn't in its prime...
December is a good time to slow down (just a little) and take stock. 2016 has certainly been a year for the political history books. As we approach 2017, the main thread running through most of our thoughts is how we adapt to these new changes and move forward.