In today’s briefing:
- What Does the Global Economy Hold in Store for Asian Economies?
- Playing with Fire – FX & Rates, Japan
- Fed Hikes Not Immune from Equity Collapse
- Pain Trades
- Indian Budget: Reform Impetus Hits A Wall As Electoral Cycle Turns Up
- Red Pill or Blue Pill?
What Does the Global Economy Hold in Store for Asian Economies?
- Resurgent covid-19 infections have slowed the global recovery but there are also clear signs of resilience and optimism about the future.
- Adjustments being made by the corporate sector and policy makers suggest that this optimism for global growth and inflation is well founded.
- Save for a modest hiccup in 1Q22, expect global demand to continue boosting Asian economies. Watch for divergences within Asia and the prospect of renewed trade aggression.
Playing with Fire – FX & Rates, Japan
- This is an opinion piece that attempts to look at the sustainability of policies set out by the Bank of Japan, namely the yield curve control.
- There seems to be a growing risk that long end yields are set to rise further, testing the BoJ’s resolve.
- Indications are already there in the interest rate curves and the performance of Japanese Banks. A further report will follow, highlighting relevant charts and trade ideas
Fed Hikes Not Immune from Equity Collapse
- Markets focussed on the risk that likely Federal Reserve and global central bank policy rate hikes and monetary policy tightening will weigh on equities and implications for Dollar.
- But there’s also risk that downturn in US equities would weigh on US consumer confidence and demand and in turn inflationary pressures and see the Fed pausing its hiking cycle.
- It may be different this time round, given very negative Fed real policy rate, but in the previous three Fed rate hiking cycles US equities were generally trending higher.
Pain Trades
- Painful trades are usually where the trend seems strong, and participants think it has a lot further to go; leverage usually is high at this point
- Last year’s yield curve steepener trade saw an abrupt trend change even though inflation expectations continued to rise
Pain trade is never apparent, so I looked for prolonging the misery. Oil and rising long-end rates fit the bill.
Indian Budget: Reform Impetus Hits A Wall As Electoral Cycle Turns Up
- The government is making another big push for growth, marked by a 24.5% increase in capex spending while revenue expenditures are flat.
- References to structural reforms were omitted altogether as the authorities slow the pace of fiscal consolidation, marked by elevated fiscal deficits and the absence of any credible medium-term fiscal roadmap.
- Consequently, the deluge of borrowings is set to test the RBI’s ability to manage yield expectations at a time when global monetary policy is tightening.
Red Pill or Blue Pill?
- Even after all the analyses and strategies I have created, I allocate most of my investments to the S&P500 while keeping some part of it for the moonshots.
- The problem with most financial advice is that it’s biased heavily towards your experience
- I am considering an equal amount invested monthly into every strategy
Before it’s here, it’s on Smartkarma
