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”

What Has Changed in EM

  • President Trump ratcheted up trade tensions
  • Japan removed Korea from its so-called “white list” of trusted export destinations
  • Thailand will announce stimulus measures this month
  • President Trump signed an executive order seeking to further isolate countries using chemical and nuclear weapons
  • Brazil COPOM cut rates 50 bp to 6.0% Continue reading “What Has Changed in EM”

Drivers for the Week Ahead

  • The dollar has strengthened as we enter what is perhaps the most eventful week of the year
  • The FOMC meets Wednesday and is widely expected to cut rates 25 bp
  • White House advisor Kudlow ruled out any sort of currency intervention by the US
  • The US July jobs report Friday will be the key data release this week
  • US-China trade talks resume Monday in Shanghai; China reports official July PMI readings Tuesday
  • Bank of Japan meets Tuesday; Bank of England meets Thursday
  • In EM, the central banks of Brazil and Czech Republic meet Continue reading “Drivers for the Week Ahead”