A detailed analysis identifying the trends that matter, incorporating the dynamics of political risk, the business cycle and other proprietary indicators.
Contact Us for a trial.
Economics ResearchEconomics Products: Absolute Strategy Weekly, Economics Quarterly, Newsflow Monitor.
Page 1: Next
Please see below for full contents
Equity Strategy: Time to Take Profits in Asia-ex-Japan Equities
Following 10% outperformance since December, and with our SBI overbought, we now downgrade our recommendation on Asia-ex-Japan from Overweight to Neutral. Recent outperformance has been supported by Activity Surprises, the region’s high Beta with respect to Global Equities, the weaker USD and lower bond yields. Our belief that surprises have peaked and global growth will slow as the year progresses therefore present a challenge to further outperformance, whilst tapering may put a floor under global bond yields. However, the increased weight of the Tech in Asian Equities may act to limit the region’s downside in a global slowdown scenario.
PODCAST: Click to hear Zahra’s accompanying podcast
Economics: US - A Bold Path Forward
In his final article for ASR, former Treasury official, Gerald Cohen, argues that a credible proposal is needed to overcome the current political morass. One avenue might be to introduce a ’20-20-20 tax plan’, suggested by Gerald himself. Without such a plan, the Trump administration risks losing the confidence of consumers and businesses, which could undermine the financial markets and economy.
Multi-Asset: Taking profits on long EM / short Materials
We are recommending clients take profits on the long MSCI Emerging Markets / short MSCI World Materials ‘convergence trade’ idea from February as: a) the performance ‘gap’ that opened up in the aftermath of Trump’s election victory has largely closed; and b) Brazil’s political scandal has brought forward Brazilian sovereign credit concerns that would probably have otherwise emerged in H2 as the growth rebound faltered.
Politics: The Four Options for Brexit
We envisage four potential Brexit outcomes, none of which include a trade deal being negotiated within two years as outlined by the UK Government.
1. A negotiated hard Brexit ASR probability 40%
2. An unnegotiated chaotic Brexit ASR probability 40%
3. A transitional Brexit ASR probability 15%
4. No Brexit ASR probability 5%
• Time to Take Profits in Asia-ex-Japan Equities, by Zahra
• Guest article: A Bold Path Forward, by Gerald D. Cohen
• Absolute Surprise: The costs of a hard Brexit, by Raph
• Absolute News: Proposals for eurozone renewal
• Sentiment extremes and markets on the move, by David
• The Four Options for Brexit, by Richard
Economics: US corporate sector: debt & disruption
Equity Strategy: An ASR Global Liquidity Signal For Global Equities
Multi-Asset: Lack of macro ‘uncertainty’ keeping a lid on vol
Equity Strategy: Lower Oil Prices will Challenge Global Earnings
Multi-Asset: Good market breadth may be bad news for EZ equities
ASR/WSJ Global Composite NewsFlow Index: 59.1 in April (61.3 in March)
• The ASR/WSJ Global Composite NewsFlow Indicator (CNI) of macro activity fell in April to stand at 59.1, compared with a 61.3 reading in March. Global CNI readings of around 50 have tended to be associated with stock returns keeping pace with bond returns on a year-on-year basis (see Chart 1). The Global CNI experienced its biggest month-on-month fall in over a year. On the basis of history, this would be consistent with a fall in the equity-bond returns ratio.
• Our proprietary NewsFlow indicators are created by searching the Dow Jones Factiva database for ‘positive’ and ‘negative’ macroeconomic news stories, counting them, and then calculating the difference (the ‘net’ news flow). The searches are done in English, so the global series will be dominated by stories from and about the Anglo sphere. But they still capture global trends well.
• The Global CNI is built up from six sub-indices – see Charts 2-7 on pages 2 & 3. The Inflation component was arguably the most striking. There have only been 4 occasions in the series’ 27-year history where the month-on-month fall was greater (Chart 6). This was even more surprising given that the Global Corporate Earnings NewsFlow rose to levels last seen in February 2011 (Chart 7).
• The loss of media interest in the inflationary story was particularly apparent in the US (Chart 17). The sub-indices show that increased ‘chatter’ around US inflation post the Presidential election has all but reversed in the past two months.
• This month’s political NewsFlow chart seeks to break down the concept of ‘policy uncertainty’ into its underlying drivers. Chart 50 suggests we are in a world where uncertainty around politics appears to take precedence over economic uncertainty.
Economics: International Trade is Also Complicated
Equity Strategy: Equities are Pricing in Slowing Trade Growth
Multi-Asset: BTPs’ shining chance
This research report is issued by Absolute Strategy Research Ltd, which is authorised and regulated by the Financial Conduct Authority (“FCA”). Absolute Strategy Research Services Inc. is registered as an investment adviser with the US SEC, and is responsible for all communications and dealings with, and only with, US persons. The report is intended only for investors who are Eligible Counterparties or Professional Clients, as defined by MIFID and the FCA, and may not be distributed to Retail Clients.
Absolute Strategy Research Ltd does not solicit any action based upon this report, which is not to be construed as an invitation to buy or sell any security.
This report is not intended to provide personal investment advice and it does not take into account the investment objectives, financial situation and the particular needs of any particular person who may read this report.
This research report provides general information only. The information contained was obtained from sources that we believe to be reliable but we do not guarantee that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the original publication date appearing on this material only and the information, including the opinions contained herein, are subject to change without notice.
This research report may not be redistributed, retransmitted or disclosed in whole or in part, without the express written permission of Absolute Strategy Research Ltd.
© Absolute Strategy Research Ltd 2016. All rights reserved.
Absolute Strategy Research Ltd. 1-2 Royal Exchange Buildings, London, EC3V 3LF. Phone: +44 (0) 20 7073 0730 Fax: +44 (0) 20 7073 0732. www.absolutestrategy.com.
Absolute Strategy Research Ltd is registered in England and Wales. Company number 5727405. Registered Office: Salisbury House, Station Road, Cambridge