China

The Rise of Populism and the Fall of Economies

Recent election cycles in the U.S. and Europe have seen the ascendance of political parties whose platforms are significantly shaped by populist initiatives. Underlining many such initiatives is a preoccupation with immigration. Earlier today the Wall Street Journal reported that 40% of Brexit supporters indicated that immigration was their primary reason for backing the Leave campaign. Although the U.K. is not party to the Schengen agreement, which enables passport-free travel across member states, eurosceptics have found a strong source of support among those fearful of spillover from the ongoing migrant crisis. In the U.S., wage stagnation and a preoccupation with …

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Smart Money Insights: Weekly Brief June 14

10 Days Until Brexit? In an earlier post, we explored the potential fallout of a Brexit and the shifting fortunes of the Leave camp. A new poll gives Leave a 19 point advantage (52% vs 33%), while UK bookmakers are pricing in a somewhat lower chance of Brexit—approximately 40%. Bookmakers are continuously revising upwards their estimates of a Brexit and bookmaker William Hill indicated in an interview with Business Insider that Leave could overtake Remain in betting by the weekend. Meanwhile, a new report from Morgan Stanley forecasts a -15% drop in European equities and a -7.8% drop in the …

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Smart Money Insights: Weekly Brief May 24

It’s time to revisit some of the big macro risks over the past year.  The risks of $10 oil, a recession in 2016, a sudden devaluation by China, Brexit and a renewed Grexit crisis all appear contained – see below.  If we’d polled readers in January about where the equity markets would be by Memorial Day if those five risks had all subsided in the second quarter, the answer most likely would not have been “flat to down YTD.”  But here we are.  Perhaps the markets are shifting to concerns about more rapid Fed rate hikes or the rise of …

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Smart Money Insights: Weekly Brief Mar 21

If March ended today, the first quarter of 2016 would look like a “yawner”: the S&P 500 index rose modestly, emerging markets and commodities bounced nicely after a terrible 2015, some of last year’s gains on the dollar reversed (which eases pressure on corporate profits), and bonds performed nicely in a world of slowing economic growth and aggressive monetary easing. Completely absent from this narrative is the violent churn beneath the surface and the damage to many investment portfolios. In that context, it’s worth revisiting some of the drivers of market volatility this year. Is the US heading into recession? …

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Smart Money Insights: Weekly Brief Mar 7

It’s been an interesting few weeks, to say the least. Equities have recovered, but gains have been very uneven. Some macroeconomic fears have abated, or at least moved off the front page. In this weekly update, we check in on some of the major themes over the past several weeks, such as the likelihood of a US recession, the next move in central bank policy, whether China will devalue, the likelihood that oil has bottomed, or whether there will be contagion from energy sector high yield bonds. Is the US heading into recession? (update from Feb 22) In the first …

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Smart Money Insights: Weekly Brief Feb 29

Here’s the second weekly brief. First of all, thank you to Harvest Exchange for welcoming us into the community; our How Smart is Smart Beta? post was very well received. As a follow up to the topics from last week, recession fears have abated somewhat (hedge funds have been right so far…) and the news flow about China has been a little calmer (brief update below). The big story last week was about Brexit – whether the UK will vote in a referendum in June to separate from the EU.   If you didn’t catch it, you might enjoy our post …

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Smart Money Insights: Weekly Brief Feb 22

Is the US heading into recession? Does the market decline in January and early February signal that the US is heading into recession? Most hedge funds think not. In the face of surprisingly large drawdowns, most hedge funds appear to be sticking to their guns or even adding to positions in US equities. You don’t see this when there’s widespread concern about the overall economy. Bottoms-up fundamental managers don’t appear to be overly concerned about the US economy, in part because they have concentrated their investments in sectors that have been doing reasonably well (e.g. consumer spending, technology). A few …

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An Excerpt from the Mid-Month Update

Given the market volatility, we provided a mid-month update to our investors.  The following is a brief commentary on the markets: For purposes of this update, we’ll highlight some ways in which the situation today is very different from 2008: On the positive side, while the Great Financial Crisis nearly pulled down the US financial system, which choked off the real economy, today US banks are less leveraged and have double ($1 trillion) the capital base relative to 2007.  US household leverage is lower as well. Likewise, there likely isn’t systemic risk from trouble in the high yield market, where …

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