Euro to Remain Better Supported

(from our Tactical of 18th October 2016) One currency that may buck the trend and remain supported against the dollar is the euro.  Although tapering from the ECB does not look imminent, core inflation may start surprising to the upside…


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Retail Stocks to Suffer Due to Higher Inflation

Retail sales will suffer in the months ahead due to rapidly rising medical and rental CPI.  Whenever rental and medical costs have risen significantly in the past, they have led to a big decline in retail sales.  You can see…


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Look for Opportunities to Re-accumulate Gold Stocks

(from our Tactical of 11th October 2016) Goldminers have a notoriously high beta to the price of gold, and they didn’t disappoint last week, with the GDX dropping 13% vs down 4.5% for gold.  However, we have had a technical…


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Real Yields Wildly Mispriced Given Stagflation Light

The US now has the worst combination of outcomes, poor growth and rising inflation.  Bond yields are now the most negative they have been in almost forty years.  Only in the 1970s during stagflationary episodes were real yields this negative.   …


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Firm Positive Drivers for Euro

(from our Tactical of 13th September) Drivers of the euro are showing support.  When the ECB in March of this year shifted its emphasis from the rate channel to the credit channel for the transmission of monetary policy, this took…


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Lower ISM Ahead, Weak Read for Stocks

The ISM Manufacturing Index came out at the beginning of the month and offers a dim view of the next three months for US manufacturing as well as for stocks.  The key data we focus on in the ISM is…


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US Corporate Debt Near Records, Credit Spreads to Widen

The present calm in high-yield markets is entirely unwarranted and at odds with where we are in the US credit cycle.  Corporate debt to GDP in the US is at all-time highs. In the past, whenever corporate debt reached around…


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Higher Inflation Target –> Even More Mispriced USTs

A discussion of late has been whether the Fed should raise its inflation target.  We think this would be a bad idea.  Currently, with a 2% target, the Taylor rule implies the Fed Funds rate should be closer to 2%….


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In the UK, the Answer is Not Blowing in the Wind

In this short blog, we will show how we looked at the UK economy going into the UK’s referendum to leave the EU, and why our approach meant our forecasts were not reliant on the referendum’s result.  We also show what our indicators are…


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Bond Yields Diverge from Inflation

Bond yields are currently diverging in a very big way from economic fundamentals, and our valuation tools point to a rise in yields.  Normally, there is a very tight correlation between the change in the ISM prices paid survey and…


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