Argentina Elections Unlikely to Change Downward Trajectory

Some Thoughts on the Argentine Election

The weekend primary vote in Argentina suggests opposition candidate Fernandez will easily win the presidential vote October 27. Uncertainty in the runup to the vote should keep Argentina under pressure, but we think Fernandez may not be as bad as markets fear. We also downplay contagion risks, as Argentina is too small and isolated to have much impact. Continue reading “Some Thoughts on the Argentine Election”

Drivers for the Week Ahead

  • US has an important data week; the US economy remains in solid shape
  • US-China relations remain strained; China reports July new loan and money supply data this week
  • Eurozone reports some key data this week; UK has a heavy data week
  • Norges Bank meets Thursday and is expected to keep rates steady at 1.25%
  • The only EM central bank to meet this week is Banco de Mexico Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM is likely to remain under pressure as US -China relations remain strained.  Despite his claims that things are going “very well”, President Trump admitted that the September talks might be cancelled.  This is very negative for EM, which saw some stability towards the end of last week. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Reserve Bank of India surprised markets with a 35 bp cut to 5.4%
  • Philippines central bank cut rates 25 bp to 4.25%, as expected
  • Bank of Thailand surprised markets with a 25 bp cut to 1.5%
  • Turkey central bank fired several high-ranking officials
  • Brazil pension reforms were passed by the Lower House by a vote of 370-124
  • Peru’s central bank joined the ranks of the easing and cut rates 25 bp to 2.5% Continue reading “What Has Changed in EM”

EM Equity Allocation Model For Q3 2019

  • EM has come under pressure again, helped by yet another flare-up in US-China trade tensions and a less dovish than expected Fed
  • MSCI EM has since given up nearly three quarters of this year’s gains
  • MSCI EM FX has fared even worse, giving up nearly all this year’s gains
  • Our 1-rated grouping (outperformers) for Q3 2019 consists of China, Korea, UAE, Hungary, and Poland
  • Our 5-rated grouping (underperformers) for Q3 2019 consists of South Africa, Egypt, Brazil, Pakistan, and Argentina
  • Since our last model update on March 7, our proprietary EM equity portfolio is -6.5%, outperforming MSCI EM (-7.0%) Continue reading “EM Equity Allocation Model For Q3 2019”

Thoughts on US-China Relations and the Investment Implications

The US Treasury named China as a currency manipulator, raising trade tensions further. A trade deal this year is now highly unlikely, and an extended trade war raises US recession risks. Still, we remain positive on the dollar and very negative on EM. Continue reading “Thoughts on US-China Relations and the Investment Implications”

Latest Thoughts on the US Economic Outlook

The dollar is undergoing a correction as the slide in US interest rates accelerates in response to the renewed tariff threats. Once again, we think US rates markets are getting too pessimistic on the US outlook and so we are sticking with our broad macro calls that were working well until the tariff news hit last Thursday. Continue reading “Latest Thoughts on the US Economic Outlook”

Drivers for the Week Ahead

  • We remain dollar bulls
  • The US has a heavy schedule of data releases this week, mostly minor
  • Even though the FOMC media embargo has ended, Fed speaking engagements this week are light
  • UK and Japan have a fairly heavy data week
  • RBA is expected to keep rates steady; RBNZ is expected to cut rates 25 bp
  • EM remains under severe pressure Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM remains under severe pressure.  The less dovish than expected Fed, renewed trade tensions, and a broad-based dollar rally have conspired to absolutely crush EM FX and equities.  These drivers are likely to carry over into this week and so we remain bearish on EM. Continue reading “EM Preview for the Week Ahead”