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23/05/16
Global
Burnt offering

The long US dollar trade has been a rather testing one so far this year. Weaker US growth and a…

03/05/16
Global
Equities – living on borrowed time

Global equity markets are generally expensive. That’s because central bank largesse has inflated price (P). Meanwhile corporate profits (E) remain…

29/04/16
Global
Trains and destinations

This paper discusses the fallout from a scenario called “stasis”. It would lead us to change many of our portfolio…

Global: Burnt offering

The long US dollar trade has been a rather testing one so far this year. Weaker US growth and a slowdown in the pace of global expansion have forced markets to reprice Fed rate expectations. That’s undermined our monetary policy divergence thesis. But we expect US growth to rebound over the remainder of the year, while inflationary pressures should also heat up. That should be enough to drag out two hikes from the Fed. At the same time, the ECB and BoJ should continue to ease. We remain long the US dollar versus the euro, yen and emerging market (EM) currencies, specifically in Asia.

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Global: Equities – living on borrowed time

Global equity markets are generally expensive. That’s because central bank largesse has inflated price (P). Meanwhile corporate profits (E) remain depressed due to a lack of final demand. Soothing sounds from central banks might have helped temper recent tantrums. But this is little more than a stay of execution. The trend for most markets — in terms of fundamental underpinnings and future performance — remains negative. We’re staying short/underweight global equities.

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Global: Trains and destinations

This paper discusses the fallout from a scenario called “stasis”. It would lead us to change many of our portfolio convictions. Stasis has a rising probability, but still only 30% over a 12-month time horizon. Outright global recession is a 15% probability and our core scenario 55%. Our conviction remains that the US economy will continue to be the strongest of the majors globally (which is not saying much) and the divergence of monetary policies will resume and set the path of currencies. However, this could take time and for the next few months it is quite likely that the market believes in stasis and many of our positions will continue to hurt.

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Our research is based on a thoroughly objective view of the world as it is, not as some might like it to be seen.

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