Arbuthnot Latham: Global Markets Report Q1 2019Siôn Puckle
Our report discusses general developments within global markets over the first quarter of 2019, with a focus on the issues influencing portfolios. Following an economic and market summary, we expand upon a number of themes before concluding with a review of the major asset classes.
No bubble trouble; stocks are still reasonably priced. This credit cycle has unique characteristics that continue to make high-yield bonds attractive. Interest-rate volatility poses greater risk than higher rates themselves.
During the second quarter of 2016, acquisitive middle-market issuers capitalized on lenders’ increased risk appetite by entering into attractively priced and structured financings. The dramatic rally in Treasury yields (and other safe haven assets) triggered by the “Brexit” referendum at quarter’s end, augurs well for further improvement in domestic credit market conditions.
Capital Markets Industry Insights - Q1 2016Duff & Phelps
Prospective middle-market issuers are being greeted with robust demand from both traditional private credit investors and crossover public market participants. While monetary policy concerns weighed heavily on market participants for much of the first quarter, the Fed’s more dovish posture of recent weeks has triggered an increase in risk appetite across the credit markets.
The fundamental theme of the newsletter remains the same -- to dive deeper into economic issues that affect our investors. However to keep it interesting, the analysis has been kept at a macro level without getting into minute details.
We received encouraging feedback on the inaugural issue and we have used the same to improve this edition.
We hope you find the newsletter interesting.
Foro Alumni "Encendiendo los Motores del Crecimiento Mundial" realizado el 29 de abril en el Hotel El Pueblo.
Expositor Piero Ghezzi (egresado UP Managing Director and Head of Global Economics and Emerging Markets Research Barclays Capital)
Advice for the Wise - August 2015
• The investor behaviour, bordering on split personality is probably why it is apt to call our times ‘interesting
• Diversification is not merely ‘sensible’, it is an absolute must
• Equity markets were broadly range bound for the month of July; with mid caps showing better strength compared to large cap stocks.
• Global markets got a scare from plummeting Chinese stocks as large number of local investors had to unwind their leveraged positions on account of margin calls getting triggered.
• The rate-cut cycle seems certain and one can anticipate interest rates to converge with the inflation rate in next 5-6 quarters
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Arbuthnot Latham: Global Markets Report Q1 2019Siôn Puckle
Our report discusses general developments within global markets over the first quarter of 2019, with a focus on the issues influencing portfolios. Following an economic and market summary, we expand upon a number of themes before concluding with a review of the major asset classes.
No bubble trouble; stocks are still reasonably priced. This credit cycle has unique characteristics that continue to make high-yield bonds attractive. Interest-rate volatility poses greater risk than higher rates themselves.
During the second quarter of 2016, acquisitive middle-market issuers capitalized on lenders’ increased risk appetite by entering into attractively priced and structured financings. The dramatic rally in Treasury yields (and other safe haven assets) triggered by the “Brexit” referendum at quarter’s end, augurs well for further improvement in domestic credit market conditions.
Capital Markets Industry Insights - Q1 2016Duff & Phelps
Prospective middle-market issuers are being greeted with robust demand from both traditional private credit investors and crossover public market participants. While monetary policy concerns weighed heavily on market participants for much of the first quarter, the Fed’s more dovish posture of recent weeks has triggered an increase in risk appetite across the credit markets.
The fundamental theme of the newsletter remains the same -- to dive deeper into economic issues that affect our investors. However to keep it interesting, the analysis has been kept at a macro level without getting into minute details.
We received encouraging feedback on the inaugural issue and we have used the same to improve this edition.
We hope you find the newsletter interesting.
Foro Alumni "Encendiendo los Motores del Crecimiento Mundial" realizado el 29 de abril en el Hotel El Pueblo.
Expositor Piero Ghezzi (egresado UP Managing Director and Head of Global Economics and Emerging Markets Research Barclays Capital)
Advice for the Wise - August 2015
• The investor behaviour, bordering on split personality is probably why it is apt to call our times ‘interesting
• Diversification is not merely ‘sensible’, it is an absolute must
• Equity markets were broadly range bound for the month of July; with mid caps showing better strength compared to large cap stocks.
• Global markets got a scare from plummeting Chinese stocks as large number of local investors had to unwind their leveraged positions on account of margin calls getting triggered.
• The rate-cut cycle seems certain and one can anticipate interest rates to converge with the inflation rate in next 5-6 quarters
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
This project was initiated by a brain storming process to find out the reasons for the bunking of lectures by the students. The causes which were responsible for 80% of the class bunking were identified.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera progressivement enrichie avec nos indicateurs quantitatifs.
Toutes nos analyses sont disponibles sur www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
1. Outlook for Commodities
The Global Commodity Systematic Program (“GCS”) is managed by Global
Advisors (Jersey) Limited (“GAJL”).
We are managers of commodity trends and provide investors with a low volatility
approach to accessing commodity markets.
The GCS program sits at an intersection. GCS is rules-based and non-
discretionary with hard coded and market-tested risk management. GCS is
focused purely on commodity futures. The investment manager brings vast
experience in the underlying commodity markets together with a team of
brilliant researchers.
GCS has proved its abilities. Now in our sixth year of profitable track record,
GCS has navigated client assets through various environments: both bull and
bear markets as well as choppy, highly volatile conditions. We have produced
positive returns each year since inception.
What we do and how we do it is covered extensively in our marketing brochure,
on our website and has been conveyed in person. But putting it in summary we
do the following:
• Identify commodity trends in 35 liquid markets
• Manage those trends in as much as they appear
• Play defensive in choppy markets by varying our time window and style of
trading, always via our system
• Manage our overall risk by being sensitive to individual market volatility,
individual trade return volatility and the cumulative returns of sequences of
individual trades. We shy away from all forms of loss by reducing risk.
So with this explained the question becomes, “Will the markets offer GCS
profitable opportunities?”
We expect that this will indeed be the case.
While understanding that the forward looking view of GAJL’s principals does
not impact our day to day activity, the question is a very valid one. We do have
a view on what drives our profitability and it is closely linked to the condition
of markets. Our view of markets, which is informed and clear, is thus a good
metric by which to measure anticipated future returns.
Currently we have a particularly strong view on the following factors:
1 The US dollar and other paper currencies will be systematically
devalued over the next few years
2 Emerging Asia, in particular China, will continue to have ravenous
demand for commodities
3 Western world economic growth will return, and probably slightly
faster than expected
4 Markets will be shocked to find that there has been an invisible
“Supply Shock” to the productive systems for commodities that
cannot be quickly rectified. As we have seen many times since the
mid 1980’s—demand is a much faster moving factor than supply.
5 Stock market investors will flock to commodity markets in never-
before-seen volumes and thus drive the underlying markets
strongly (up AND down)
To support these points we have added some charts below, courtesy of
Barclays Capital, to give simple graphic support.
Before doing so however, let us restate the main thesis:
If commodity markets exhibit strong trends then
the “gcs” program will manage those trends and
provide strong returns.
We believe that the points listed in the previous paragraph clearly indicate
strong trends in the next two years.
1 The US dollar and other paper currencies will be systematically
devalued over the next few years
Federal Reserve Assets (Uses of Funds)
Note here: The very sharp spike in liquidity following the Q4 2008 crash
has not in any way been removed from the market. In fact today, the “cash”
liquidity injected then has simply been replaced with far less liquid, unwanted,
government guaranteed and other mortgage-related debt.
Financial institutions have simply exchanged this with the government in lieu of
the money they owed.
Look now at the real time deficit.
US Real-Time Deficit
Almost ALL of the estimated receipts now add up to significantly less than social
welfare and military spending. $600 billion alone will go to military spending,
dwarfing that of the next biggest military spender, China, by a factor of six.
As the White House’s own budgeted projections will attest, there is a projected
additional annual deficit for every year that is forecast out to 2020.
The USA is bankrupt and the dollar, a measure of the country’s worth—will
fall hard.
2 Emerging Asia, in particular China, will continue to have ravenous
demand for commodities
Chinese Oil Demand Growth, Y/Y Change
Note the dramatic year on year increase in motor diesel and petrochemical feed.
It is running at about 20% per annum.
G L O B A L A D V I S O R S Professional Asset Management In Commodities
Agency Debt MBS
Lending to Nonbank
Credit Markets
Short-Term Lending
to Financials
Other
Treasuries
$2,500
$2,000
$1,500
$1,000
$500
$0
$inBillions
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10 Through Feb 24
4.000
3.000
2.000
1.000
0
Receipts
Estimate
Expenditure
Estimates
USDollars($inTrillions)
Other
All Other Departments
and Agencies
Department of Defense
Interest
Medicaid
Medicare
Social Security
Potential Disaster
Discretionary
Spending
Mandatory
Spending
Other
Source: Kelvin Case
Gasoline
Diesel
Petrochemical Feed
80%
65%
50%
35%
20%
5%
-10%
-25%
Source: China Customs, Barclays Capital
May-08 Nov-08 May-09 Nov-09 May-10
2. 4 Markets will be shocked to find that there has been an invisible
“Supply Shock” to the productive systems for commodities that
cannot be quickly rectified. As we have seen many times since the
mid 1980’s—demand is a much faster moving factor than supply.
This is hard to show graphically. During the last commodity peak, much
investment was being made on account of optimism in, and fear of, future high
prices. Alternative energy projects flourished in particular but the investment
covered almost all commodities. That investment has been severely curtailed
post the financial crisis. We cannot put it better in our own words than was
done by the concept note issued by the Global Commodity Forum at the United
Nations Conference on Trade and Development:
“As a result many investment projects have been cancelled and commodity
companies are cutting costs and improving efficiency and use of technology to
preserve working capital. While prices have fallen across the board, they started
to recover in 2009 and are still above pre-boom levels. Uncertainties surround
future prices and their volatility as well as the prospects for investments to
increase supply side capacities. Under such uncertain conditions, producers are
reluctant to take the risk of committing capital to new ventures, even if they were
able to find the necessary finance.”
[ http://www.unctad.org/sections/wcmu/docs/gcf2010_Concept_en.pdf ]
Put simply—there isn’t the confidence of the funds to invest in expanding the
commodity supply cap to meet future rises in demand—even if only to previous
pre-crisis levels. This is a little talked about effect.
5 Stock market investors will flock to commodity markets in never-
before-seen volumes and thus drive the underlying markets
strongly (up AND down)
If our ideas about the potential profit to be gained by investing in commodities
are correct then the final question is how is capital going to find its way into the
commodity markets to create strong trends. The answer lies in the emergence
of many new ways that investors, in ever-growing size and number, have access.
Commodities, with perhaps the exception of the last two months, have not yet
reached peak appeal. The final act will be when investors feel that their wealth
is being inflated away by rising commodity prices or indeed the simple notion
that they are missing a profitable trade. Then the buying will reach a crescendo.
This moment is still far off but the graph below shows the growth even now
in the assets flowing to commodity linked financial products. Much of this is
attributable to gold, but our view is that it will spread throughout the complex.
Total Commodity Assets Under Management
Total Primary Energy Consumption
China is now exceeding the entire EU in primary energy consumption.
Chinese Demand Relative to Others (mb/d)
3 Western world economic growth will return, and probably slightly
faster than expected
US Oil Demand (12-month average, mb/d)
Energy demand in the US was savaged by the financial crisis. As a very good
indicator of overall demand in the US it can be seen here to have bottomed and
now it is starting to rise. While growth rates and job losses remain problematic
in the US, in the UK there have been strongly positive numbers returned in
GDP—against market expectation. These two economies are closely linked.
G L O B A L A D V I S O R S Professional Asset Management In Commodities
USA 19%
China 19%
EU 15%
Russia 6%
Japan 4%
Rest of the World 37%
Source: BP Statistical Review of World Energy, 2010
China
Japan
Germany
9
8
7
6
5
4
3
2
1
0
Source: Barclays Capital
70 75 80 85 90 95 00 05 10
21.0
20.5
20.0
19.5
19.0
18.5
Source: US Energy Information Administration, Barclays Capital
01 02 03 04 05 06 07 08 1009 11
Cumulative Notional
Value of Commodity
Medium Term Note
Issuance
Exchange Traded
Commodity Products
Barcap Estimates
of Index AUM
Attributable to
Institutional
Investors
Institutional and
Retail Commodity AUM
320
280
240
200
160
120
80
40
0
Source: Bloomberg, MTN-i, ETP issuer data, Barclays Capital
Q2 05 Q1 06 Q4 06 Q3 07 Q2 08 Q1 09 Q4 09 Q3 10
$inBillions
This document is issued by Global Advisors (Jersey) Limited (“GAJL”), which is regulated by the Jersey Financial Services Commission to provide investment business. It is registered with the Commodity Futures Trading
Commission (the “CFTC”) as a Commodity Trading Advisor and is a member of the United States National Futures Association. Pursuant to an exemption from the CFTC in connection with accounts of “qualified eligible
persons,” this document does not require to be, and has not been, filed with the CFTC. The CFTC has not passed upon the merits of participating in the Global Commodity Systematic Program (the Program”) or the
adequacy of this document. The Program is available only to “qualified eligible persons” as defined in Rule 4.7. This document does not constitute an offer to enter into a segregated account or to buy or sell shares in
funds which GAJL manages (the “Funds”). The prospectuses of the Funds are the only authorised documents for an offering of shares in the Funds. The prospectuses may only be distributed in accordance with the
laws and regulations of each appropriate jurisdiction in which any potential investor resides. Investors are reminded that past performance is not indicative of future performance and that they might not get back
the amount that they originally invested. Investment in the Program carries a high degree of risk. The Program and the Funds are only suitable for sophisticated investors who are aware of the risks in investing in
highly volatile products, and, in addition, for Fund investors, in hedge funds. The contents of this message and the document do not constitute, nor should be construed as, investment advice. Potential investors
should seek their own independent financial advice. The information contained in this document is strictly confidential and is intended only for use of the person to whom it has been provided by GAJL. No part
of this document may be distributed to another person, and/or reproduced, without GAJL’s prior written permission. The names, logos, slogans or mottos identifying GAJL’s products and services are proprietary
trademarks/service marks of GAJL, and may not be used in any way without GAJL’s prior written consent. GAJL has taken all reasonable care to ensure that the information contained in this document is accurate at
the time of publication; however it does not make any guarantee as to the accuracy of the information provided.