DM Equity Allocation Model For Q1 2019

We are pleased to introduce our new Developed Markets (DM) Equity Allocation model. Building on the success of our EM model, this new framework extends our analysis to cover 24 DM equity markets. Our analysis is meant to assist global equity investors in assessing relative sovereign risk and optimal asset allocation across countries within the DM universe.

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99 Problems But The Fed Ain’t One

The Fed delivered an extremely dovish hold today. In doing so, we fear that the Fed has given in too much to the market and its tantrums and recent Fed messaging leaves a lot to be desired. There are still a lot of potential risks to the market ahead. As such, we see potential for further volatility and swings in market sentiment if this current round of Fed messaging turns out to be too dovish, as we suspect. For now, however, markets have the green light to buy equities and sell the dollar.

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US Shutdown Ends (For Now), Debt Ceiling Battle Up Next

The US government has reopened after the partial shutdown that lasted 35 days. Yet the clock is running since the stopgap spending bill only funds the government through February 15. Even if a lasting deal is reached, this recent dysfunction suggests problems ahead as the debt ceiling comes back into effect March 2.

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US Shutdown Update

The debt ceiling and government shutdowns are two separate and distinct issues in the US. Yet problems dealing with the two issues are very much correlated, since the root cause is usually a dysfunctional or divided government. Here, we focus on the government shutdown. We will deal with the debt ceiling in another piece.

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Possible Brexit Scenarios

UK Parliament is scheduled to hold its Brexit vote tomorrow. The outcome is expected sometime between 7-10 PM London time, and is likely to result in a rejection of May’s plan. What’s unclear is what happens next. Here, we try to put together some possible scenarios. For the most part, the scenarios would seem to favor UK assets for anything other than a no-deal Brexit.

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Uridashi Issuance in 2018

In 2018, foreign currency Uridashi issuance totaled $9.0 bln. This represents a slight increase from $8.5 bln in 2017 but falls short of the $12 bln issued in 2016. Continue reading “Uridashi Issuance in 2018”

A Look Back at Late 2018 and a Look Ahead to Early 2019

We wanted to alert our readers to recent market events that might have been overlooked due to the holidays. Furthermore, we offer some brief thoughts on 2019, many of which will be fleshed out further in our upcoming FX Quarterly for Q1 2019.

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FOMC Preview

The FOMC meets Wednesday and is widely expected to hike rates 25 bp. Markets will be more interested in what the Fed sees for 2019 and 2020. In that regard, it is quite possible that the Dot Plots tilt slightly more dovish, but we do not think the FOMC statement will veer much from recent Fed communication.

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France to Underperform as Downgrade Risk Rises

French President Macron has backtracked in the face of increasingly violent protests against his policies. While this may provide a temporary calm, we believe France will remain under pressure as protests continue and the macro backdrop worsens.

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