A perfect three-pronged storm is brewing: oil, the labor market, and fiscal policy in the US will soon propel inflation notably higher than appreciated by overly complacent economists and analysts stuck in a delusion of “low-flation” recency bias. Just this past Friday afternoon–Friday afternoons being the most notorious time to quietly dump toxic news sludge into the market–Saudi Arabia went […]
Emerging Market Credit Risks Could Fuel a Temporary Rush of Capital into USD as the Receding Tide Exposes Naked Swimmers
Risks are increasing for a rapid rush of capital out of low-quality EM and this could temporarily reverse or complicate the longer term trajectory of a weaker USD.
We like to build a foundation of top-down macro themes over longer time frames and then optimize specific risk management strategies to fit the nature of the themes more actively.
Venezuelan sovereign credit default swaps have priced-in imminent default.
Global Macro Backdrop: Absolutely remarkable and historically unprecedented Developed market equity indexes are scorching higher across the board. New all-time highs or multi-decade highs are being reached nearly every day in the US, Japan, Germany, and elsewhere. Bond yields are constrained across the duration and risk spectrum near multi-decade lows. European sovereign 2-year notes in periphery nations such as Italy, Portugal, and Spain are negative and continuing to hit new lows. Bond spreads between Germany and the periphery are generally narrowing to new lows, pricing in similar levels of risk between EU nation states. European high yield bonds are trading below 2%. Equity, bond, and currency market volatility are all at or near historic lows. This is the least volatile […]
USD is acting more like an injured EM commodity currency with political risk typically witnesses in developing countries, not a safe haven.