Markets have started to recover after last week’s sharp selloff thanks in part to policy easing. Yet according to US rates guru, George Goncalves, rate cuts may not be the best tool to use. Then there is the longer-term issues of de-globalisation. Former Deutsche Bank economist Caroline Grady, looks at how global trade volumes are faring.
COVID has also brought renewed focus on commodity markets. We therefore feature two Exclusives on the topic. First, commodities expert John Butler provides his first instalment in how to treat commodities as an asset class. Second, top-rated oil analyst Virendra Chauhan looks at the medium-term case for oil even in a world of heightened concerns over climate change. With OPEC meeting today in Vienna this seems particularly timely.
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Markets have started to recover after last week’s sharp selloff thanks in part to policy easing. Yet according to US rates guru, George Goncalves, rate cuts may not be the best tool to use. Then there is the longer-term issues of de-globalisation. Former Deutsche Bank economist Caroline Grady, looks at how global trade volumes are faring.
COVID has also brought renewed focus on commodity markets. We therefore feature two Exclusives on the topic. First, commodities expert John Butler provides his first instalment in how to treat commodities as an asset class. Second, top-rated oil analyst Virendra Chauhan looks at the medium-term case for oil even in a world of heightened concerns over climate change. With OPEC meeting today in Vienna this seems particularly timely.
Enjoy!
Bilal
Fed And Money Markets: At The Crossroads Of A Mad Dash For Cash? (4 min read) In money markets, months, quarters, and even years can pass with little fanfare. And then all of sudden, a new regime sprouts up and events shift rapidly. In my opinion, we have entered such an environment post the Fed’s emergency 50 bps rate cut. The dilemma is that the fuse is much shorter this time versus prior cycles following last year’s ‘insurance cuts’ – and also because the Fed barely made it to the half-way point in rates compared with prior tightening cycles. This, coupled with less short-term (S/T) investments relative to long-term (L/T) securities and the likelihood for cash to remain in demand if market vol stays high, may add to the angst…
(George Goncalves | 5th March, 2020)
COVID-19 De-globalisation Shock (2 min read) COVID-19 supply chain disruptions will abruptly end the nascent recovery in global trade. The demand shock from quarantines and other preventative measures will amplify this as imports compress. Last year’s annual decline in trade volumes will likely be repeated and a third consecutive year of slowing global GDP growth appears unavoidable. Gradual yet potentially prolonged de-globalisation is real. Asia has so far borne the brunt of the trade decline, but we expect its effects soon to become evident in Europe also…
(Caroline Grady | 5th March, 2020)
Commodities: An Investment Framework, Part I (6 min read) Global commodities prices have recently declined sharply, along with a general ‘risk-off’ trade in financial markets. But commodities were already in a multi-year downtrend prior to recent developments and have generally performed poorly since 2011. In this, Part I of a series on commodities investing, I provide a framework for understanding what commodities are, what they are not, and whether and how they could or should be included in a diversified investment process. In brief, I believe commodities can play an important role, but not the role most popular with investors in recent years…
(John Butler | 5th March, 2020)
Oil Is Here To Stay (4 min read) Global supply and demand of liquid fuels both breached 100 million barrels per day (mb/d) for the first time in 2018. As arbitrarily symbolic as that number is, behind it lies a broader, constant trend spanning several decades: economies are growing and require more energy, pushing continued demand to further expand the world’s cheap and accessible supply of it. Yet there is a simultaneous need to limit the rise in global temperature to below 2°C under the Paris Agreement. So how do oil and gas producers fit into this story?
(Virendra Chauhan | 5th March, 2020)
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)