Despite the ongoing efforts of central banks to debase their currencies through increasing their monetary bases and some outright calls for devaluations, consumer prices remain weak across much of the developed world, and many market observers have begun to focus on the too-real possibility of the global economy falling into a deflation “trap.” Deflation now…
The Capital Markets Authority of Saudi Arabia recently announced its intention to open the local equity market to direct investment by qualified foreign investors at some point in 2015. These investors must be reputable and substantial financial institutions that manage a minimum of US$ 5 billion in assets. While foreign investors have obtained economic exposure…
By comparing the net flow rate with the real investment return, an institution can determine whether its LTIP is successfully sustaining its role in the institution’s business model The net flow rate is the regular LTIP payout rate plus reinvested operating surpluses, capital additions, and capital withdrawals. Over the long term, the real investment return…
Imagine that during a single year, the following events all took place: a country that produces 13% of the world’s oil became engaged in armed conflict; the United States and other nations fought a self-declared caliphate looking to quickly spread its influence in the oil-rich Middle East; and a nation that produces 3% of the…
Claims that Europe is becoming the next Japan have grown louder in recent months, after Eurozone GDP growth flat-lined in the second quarter and consumer prices increased just 0.4%, the lowest level in nearly five years. Clear parallels do exist between the current Eurozone macroeconomic environment and that which started to take shape in Japan…
Investors should be prepared for increasing stress in China that will impact global markets and create opportunities There are several valid reasons why China may avoid a financial crisis or hard landing given the unique characteristics of the Chinese economy. However, investors should not be complacent. Our view is that the Chinese economy will slow…
Increasing exposure to Chinese equities today requires a long time horizon, or a willingness to be tactical amid what will be a difficult few years A case can be made that Chinese equities are attractive today based on low valuations and may rally strongly if policymakers apply additional stimulus to support the slowing economy. However,…
US dollar strength has been building for some time, with the trade-weighted index on an uptrend since mid-2011. However, until the middle of this year the dollar rally had been hesitant, with movements in underlying major currency pairs idiosyncratic. But since early July, the US dollar has strengthened rapidly against a basket of currencies as…
Quantitative price-momentum strategies can be sensibly employed by long-term investors, particularly when paired with value-oriented strategies Growth indexes, by systematically screening out the most attractively valued stocks, have underperformed their broad market counterparts more often than they have outperformed, and we believe that will continue to be true. Rather than pairing their value-oriented managers with…
Investors today should consider holding cash—or preferably, increase sovereign bond allocations—given the extraordinary number and scope of current unknowns Current valuations, the role of central banks, a murky outlook for many global economies, and increasing geopolitical flashpoints add to uncertainty in the current environment. Holding some cash as dry powder to buy assets when they…