There’s a range of themes in the market currently but none of these seems to dominate. In the very short-term the UK elections have benefited the pound, but one has to remember just how far the currency has fallen in the past 9-10 months. Today we provide a selection of research on these themes, namely Brexit risks, Fed balance sheet, French elections, and inflation.
Substantive's Top Themes - Best of the Broker Notes
1. Stagflation, Hyperinflation; Opportunities Abound
We expect stagflation and then its remedy, hyperinflation to begin shortly after, writes Paul Brodsky from Macro Allocation. The thing is investors aren't for this, and opportunities abound, he says. In this note he outlines some of these opportunities. If you'd like to read the full note, click below to request from Macro Allocation. Thye're happy to provide on a complimentary basis.
2. Brexit: What You Need to Know
Yesterday all the headlines were about the calling of a snap election in the UK. How much risk gets pricked in around this event in June is too early to say. But on the assumption that the Conservative Party remains in power, nothing changes too much on the Brexit process. Vincent Deluard from INTL FC Stone has produced this engaging and informative note on the Brexit process moving forward. While we appreciate that you have had you fill on research covering this topic, we think Deluard offers a fresh perspective on this topic. For instance, his views of the potential ”Big Bang” in Europe, which might be considered as a solution to Brexit. It’s gaining some momentum as the ”big idea” in European chancelleries
3. French Elections: Battle for the Undecided
Nightberg is a US based macro research firm founded by former Bridgewater and Moore Capital analysts Birgir Haraldsson and Mario Manna. Their political analysis (an essential part of their investment framework) is anchored to Predata’s election signals that are crafted by combining various social media sources, such as Twitter and Wikipedia, whereby they create state-of-the-art metadata indicator scores. These scores are not equivalent to polls, but do help in detecting how the pendulum of sentiment is swinging ‘on the ground’ in real-time. In their latest piece they assess both recent polling results with the digital political footprints of the candidates in the French elections. The results suggest Le Pen is in a reasonably strong position: she’s currently leading in both domains. Click below to request access to this report.
4. Fed Balance Sheet and the Dollar
Deutsche Bank’s Alan Ruskin has produced a fairly balance piece on what the reduction in the Fed balance sheet means for the dollar. While balance sheet reduction is likely to be ”materially supportive” for the USD, it’s a long way from being a game changer, says Ruskin. In fact, a bear steepener – which is what balance sheet reduction implies – would typically weaken the dollar, writes Ruskin. But not all bear steepeners are created equal. A steepener driven by balance sheet reduction represents policy tightening and an increase in real long-term rates. This has very different consequences for currencies, where inflation is pushing up yields and driving curve steepening. Yesterday DB hosted a conference call late last week that covered everything from the mechanics of running down the balance sheet to its implications for all rates and FX markets. Ruskin's piece is on the research portal, while you can contact your local salesperson for the dial in code for the call replay.
5. The Big Questions on Trump's Energy Policy
Divya Reddy, Practice Head of Eurasia Group’s Global Energy Group, recently hosted a conference call to discuss the implications of President Trump’s executive orders on energy. Some of the key questions addressed were: What will be the fate of the Clean Power Plan following Trump’s executive order on energy? What will be the impact on the US power mix of repealing the plan? Will coal see a renaissance? Will renewables see a rout? Will the US remain in the Paris Agreement? If you would like to listen to this recording, Eurasia Group are happy to make it available on a case-by-case basis.