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There is no doubt that big swings in the value of the US Dollar have a big impact on global economic growth and also financial markets performances. Between June 2014 and January 2016, as the Dollar rose by over 20%, global equity markets struggled (Emerging Markets suffering the most), commodity prices plunged and deflationary concerns moved front and center. After the Dollar topped in late January, everything has turned around. The Dollar has traded sideways, financial markets have performed pretty well overall and economic concerns have abated. Although it cannot all be about the Dollar, we need to recognize that the Dollar is extremely important for both financial markets and the global economy.

Investment consultants are a force to the reckoned with in the pension world. They advise and drive many pension decisions around the globe.

Managed futures shows good long-term performance versus equities. Yes? No? If you start investing in the SocGen CTA index in 2000 and compare with any end year until 2015, you will shows positive returns as a stand-alone investment.

The modern financial world could not exist without effective central banking. The foundation of this core invention is a trust in banking; a trust that a paper claim can be used as a medium of exchange and a store of value…

What experience and history teaches us is that people and governments have never learned anything from history, or acted on principles deduced from it.- Georg Hegel 1832

This is a quote heard before; however, many have not given it specific operational meaning. This is especially true for financial analysts. What is learned in history can be varied, but what is critical is accepting that what people and governments will do is often mistaken. Current motivations for action will differ from should be done if there is a close reading of history. There is a strong distinction between what people and government “should” do if they internalize history and “will” do.

I finished reading The End of Alchemy: Banking, the Global Economy and the Future of Money and came away with some useful but simple insights on the current state of finance by the author Melvyn King.

Dennis Weatherstone, the former CEO and Chairman of JP Morgan had a special approach for deciding on the riskiness of new products.  He would give the developers three 15 minute slots (45 minutes) to explain the product. His rule for approval would be simple. If the product could not be explained in the allotted time, […]

All hedge fund strategies are not created equal. Correct hedge fund classification is important. Poor classification will generate false conclusions on the skill of the manager and may deliver return streams that are unexpected. Asset allocation becomes more difficult if classification is ineffective.

September came and went with a relative whimper. It was our view that various key macro events scheduled throughout the month coupled with uncertainty over monetary policy, had the potential to produce significant moves across global markets. As it turned out..with the exception of the commodities sector…this was not the case. U.S. equities ended the […]

Risk parity has been one of the most important advancements in portfolio construction over the last decade. It places the focus on equalization of risk and not on comparing expected returns which are notorious for being difficult to forecast. However, there is a problem with risk parity. It will allocate more to low risk asset classes that may be subject to a downturn. There is no opinion on market direction or valuation. It assumes the investor has no information on individual assets or view of factor risks. Outperformance relative to cap weighted portfolio is related to whether low risk assets have returns than higher risk assets.

International finance has been increasingly confusing for academics, policy-makers, and traders. Just when you think currency markets will be well-behaved and follow theory, they will move in ways that are totally unexpected. We have always known that currencies are hard to predict given they are expectational markets. Even with perfect foresight about underlying fundamentals, our ability to explain currency is suspect. The research continues to show that currencies are hard to predict and fundamental models can only explain a small percentage of the price variation. There needs to be a deeper framework for understanding foreign exchange behavior.

Who is looking at the economic data when the US is closing in on one of the most important presidential elections in the last few decades? Of course, what presidential election has not been important? Personality polarization has driven party behavior to extremes with little focus on policy proposals. Constant change to meet the current electoral audience has created uncertainty; however, the written proposals of the candidates provide clear policy differences.