Macro Monitor

We created an equity basket that can track the movement of the U.S. 10-year yield. Overall, it does a good job of capturing the major moves.

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Despite the recent signal whipsaws, we have been cautious toward all risky assets and we continue to recommend defense amid higher volatility across all asset classes.

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Despite the recent signal whipsaws, we have been cautious toward all risky assets and we continue to recommend defense amid higher volatility across all asset classes.

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The 40 bps jump in the 10-year yield, a 2-standard-deviation event, occurred within a five-week win-dow. Interestingly, historical data doesn’t suggest a continued increase in the near term.

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We have been leaning toward the defensive side despite the recent signal whipsaws and we continue to recommend caution in light of the increase in volatility across all asset classes.

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A significant rise in real yields would make us turn cautious toward all spread products.

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While mid-term elections are rarely big market movers, this year’s election demands more attention as it has the potential to alter the balance of political power in Washington.

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The recent move higher in rates had broader support as other major markets also saw higher rates.

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Our Risk Aversion Index fell sharply last month and triggered a new “Lower Risk” signal. Caution is still strongly recommended, and we favor higher-quality credit within fixed income.

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Attractive relative valuation outweighs concerns about heavy issuance and moderate deterioration in underwriting standards.

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What some EM countries are going through is a classic sequence that can potentially lead to a full-blown EM crisis.

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The increasingly greater attention given to the yield curve by equity investors has prompted us to come up with an equity basket that can track the movement of the yield curve. Overall, it does a reasonably good job of capturing the major moves.

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Our Risk Aversion Index reversed higher last month and triggered a new “Higher Risk” signal. We recommend a defensive stance within fixed income.

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Both interest rates and investment grade spreads are at a reasonably attractive level to provide downside cushion.

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The underperformance of investment grade credit this year prompted the question of whether a risk-barbell portfolio of safe Treasuries and risky high-yield bonds may offer better performance than a middle-of-the-road portfolio of 100% investment grade corporate bonds in a highly-uncertain environment.

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2018 has been very atypical so far. But if the historical pattern is any guide, a near-term pull back should be expected in most equity markets, followed by nice year-end rallies.

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Our Risk Aversion Index fell enough last month to generate a new “Lower Risk” signal. This is certainly not a “no brainer” risk-on signal. We recommend higher quality spread products within fixed income.

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While we believe overall volatility is likely to stay high, both interest rates and investment grade spreads are at reasonably attractive levels to provide a downside cushion.

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As credit spreads widened, something rather unusual happened: investment grade Corporate bonds performed far worse than High Yield bonds.

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We believe the negative impact of central bank liquidity reduction is here to stay for the foreseeable future. We recommend defense within fixed income.

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