What are the risks after the rebound in financial markets ?

Source: Bank of America Merrill Lynch

The rebound in financial markets reflects strong optimism among market participants that real and nominal economic growth and inflation are about to get stronger in the coming years. This view has supported a sharp rebound in valuation ratios (see chart above). At the same time, USD has continued appreciating against most currencies, and the fixed income market has consolidated on the back of rising yields. Lire la suite

USD insensitive (so far) to Fed’s possible rate hike

According to UBS’strategists:

« Since our last FX Atlas in early July, market pricing for a December hike has risen from near zero to more than 50%, and US 10-year yields have risen nearly 30bp. Yet neither has been much help to the dollar, which remains locked in an extremely narrow range, and on a trade-weighted basis, is actually a bit weaker during this time. »

Later they write:

« We continue to see the dollar as having peaked on a trade-weighted basis versus DM currencies, the euro in particular. Fair value models indicate that the euro remains cheap, and with the growth gap between the US and Euro area shrinking, we continue to forecast a grind higher to our year-end target of 1.16. »

Morgan Stanley Cross asset views after Brexit

MS_cross_asset_views_Jun2016

Source: Morgan Stanley

Interestingly, one week after the event, systemic risk doesn’t seem to be an issue…

MS_cross_asset_views_Jun2016_Systemic_Risk

Source: Morgan Stanley

Views per asset classes:

  • Equities: stay defensive (global earnings have been falling, and valuation are relatively fair)
  • Currencies: USD bull market is not over…
  • Rates: lower for longer
  • Credit: best option for carry

What to worry about – JPMorgan View

« The uncertainties that made us cut our risk OWs to small have not gone away and merit hedging. The biggest one comes from an early end to the cycle caused by the lack of productivity growth. Inflation will be the warning sign and should be hedged. »

Another good read from Jan Loeys and team at JPMorgan…  Lire la suite

Recap: asset classes and ECB QE – Morgan Stanley

For those investors who did not have time to read all Morgan Stanley’s reports about ECB QE and its impact on asset classes, here’s the summary of the summary.

Lire la suite

A more favorable backdrop for risk assets – Barclays

On the back of slightly better global growth in 2015 and most importantly accommodative monetary policies, risk assets should prevail next year, says Barclays in its freshly published outlook. Attached is the summary per asset class, and some key introductory remarks to this 168 page document distributed to investors and clients. Enjoy!

Lire la suite