What is particularly worrisome about the global slowdown is that it was largely set in motion by the investment bust in the United States. The key issue for the global economy in the future is whether the next recovery, when it finally arrives, will correct the imbalances that the boom created in each economy, or…
Small-cap stocks in the United Kingdom and Europe are attractive because they provide added diversification within domestic, not global, markets. In addition, their valuations are more attractive than those of their large-cap brethren.
Market shocks, such as that seen following September 11, serve as a reminder of the benefits of diversification into asset classes with different economic bases of returns. While correlations among global equities are currently high, they still offer some degree of diversification benefits. Other asset classes, such as nominal bonds (particularly high-quality bonds), inflation-linked bonds,…
The economy and capital markets were heading decidedly downward before the terrorist attacks intensified the public’s overall feeling of uncertainty and risk. While the post-September 11 panic selling has subsided, markets are still pricing in considerably higher risk premiums than existed prior to the terrorist attacks. This increase in risk-aversion affects economic growth and corporate…
A primer on exchange-traded funds (ETFs), including a comparison of the costs and benefits of ETFs and index funds in terms of trading costs, fees, tracking error, and capital gains.
With world markets mired in a severe synchronised slowdown, the long-term outlook for U.K. and continental European equities remains uncertain. While capital markets may take short-term comfort in further interest rate cuts by the European Central Bank and the Bank of England, extra liquidity and lower borrowing costs may not be enough to encourage nervous…
This short paper examines the bubble environment caused by billions of dollars flowing into hedge funds in 2001 and suggests possible sources of value added. Particular emphasis is given to the convertible arbitrage, merger arbitrage, distressed, and long/short equity subcategories.
The U.S. dollar’s recent decline against other major currencies has led to speculation that this long dollar bull market may be over. A secular decline or sharp drop in the U.S. dollar is not inevitable, but it cannot be ruled out.
The recent rally has led to speculation that the euro may be embarking on a prolonged bull market and the outlook for the euro/U.S. dollar exchange rate clearly hinges on the relative strength of the U.S. and euro-zone economies, and the outlook for relative capital demand in particular.
The failure of conventional fiscal stimulus, the growing evidence of widespread deflation, and the impending crisis posed by mounting government debt all indicate that the authorities must attempt to reflate the economy by any means possible, including currency depreciation. However, the efficacy of yen depreciation is far from certain, as its impact on consumer prices…