They call it the Trump effect, the sharp and mostly unexpected rebound that, from the lows of early November, gave a boost to the equity markets worldwide. Not all the markets reacted the same and the swings were also influenced by volatile currencies. Just think at the big correction of the Japanese yen that dropped more than 10% against the Greenback in a few days.
This Newsletter has reiterated that bonds are not an asset class that should be in one`s portfolio unless they are safe short-term high-yield corporate issues. The election victory of Donald Trump seems to have been the catalyst that set off a global rout for fixed-income securities. 10yr Treasuries yield increased from 1.88% on 8th November to 2.34% on 18th November 2016. Of course, if the yield increases, that means that the price on paper in the secondary market decreases.
The USD/JPY currency pair behaved in accordance with expectations on Thursday, having successfully retaken the 113.00 level and leaving the immediate resistance area intact. Despite technical indicators retaining bullish signals, the Buck now is under higher risk of weakening against the Japanese currency, as the pair still faces a rather strong resistance, now formed by the weekly R2 and the 23.60% Fibo. Even if bulls manage to push the Greenback higher, a surge beyond the ascending channel’s resistance line at 114.44 is unlikely. The base case scenario is a decline up to 100 pips, as a slump further would imply a downside breach of the channel pattern.
The rise in the U.S. interest rates is a major concern for the financial community. The leading topic is structural: return of inflation and a Central Bank far less dovish than before. Furthermore, the Trump election and his proposals to cut taxes and boost spending via tax credits on infrastructure has fuelled strong reactions in the bond market.
When it became clear that Donald Trump would win the US presidential election, markets initially turned very red, ironically the color of the Republican Party. The day after the election in the US, futures were down about 4%, the dollar lost about 2% and the oil price lost about 4%. Gold, in our opinion, was the only winner… Markets don’t like uncertainty and while there will certainly be winners and losers over the short term, it is too soon to determine any long-term effect. The price of risk is certainly going up, which we believe explained the majority of the fall.
Leonteq is one of the leading platforms for investment products in Switzerland, with currently more than 2’000 listed products. The company continuously improves its infrastructure in order to increase the variety and transparency in the structured products market for all investors. To come closer to reaching this goal and to meet client demand for ever more individual solutions Leonteq Securities started offering the first versions of Constructor since the spring of 2008. The Constructor is primarily designed for institutional clients, such as full service banks and private banks, asset managers, insurance companies and pension funds.
The macroeconomic headwinds and elevated volatility currently serving as a cornerstone for much of the prevailing investor uncertainty show little sign of receding. The Brexit vote and the ensuing political and economic uncertainty only amplify the uncertainty.
With traditional assets failing in their capital preservation and portfolio stability purposes, investors need to look for something else to help offset the risk generated by equities. Demand to generate returns which are not beholden to the direction of asset markets has become more pronounced.
Do not be afraid.This is not a piece on philosophy.
It is a very short essay on one of the market themes I am more emotionally attached: active investing.
The reason is straightforward: I am an active investor. In an era of ever-rising prominence of passive investing, I want to spend few words defending the social usefulness of my work and the one of my fellow colleagues that put all their brains in the tough but fascinating world of active investing.
At this stage, you probably wonder what would be the link with Immanuel Kant in the title. It is stronger than you think.
