How Will Developments in China Affect U.S. Investors?

china_crisisOn August 11, the Chinese government devalued the renminbi (RMB) for the first time in 22 years. Resulting global market volatility has been significant – but what implications might this turmoil have for the U.S. equity market?

Our research indicates that historically, there has been no correlation between the Chinese equity market and the U.S. equity market. In looking at 11 Shanghai bull and bear markets from 1993 to 2014, our analysis reveals that in bear markets the Shanghai stock exchange sold off 19.1% on average, but the S&P 500 Index actually gained 3.5%.

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Summer Turmoil: No Reason to Panic, But Keep A Defensive Stance

What’s Happening In Global Financial Markets?

ThinkstockPhotos-466013294The recent weakness of Chinese equity markets is spreading into risk assets around the world. Developed Markets, initially resilient to Renmbimbi devaluation, are now pricing in the deflationary effects of China’s slowdown on Emerging Markets, already fragile, and more broadly, on the global economy. Continue reading

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A Multi-Asset Response to Rising Bond Yields

Balanced Strategies Desk

Reema Desai looks at three ways the team believes alpha can be generated against an environment of rising yields. Reema also outlines what investors might consider going into Q3 2015

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Greece at Centre Stage: Can we Expect Market Normalisation?

European Investment Grade Credit

Markets have been erratic during the first half of the year, as economic volatility has continued to the end of Q2. Alessandro D’Erme explores the potential market changes in this environment and how they could impact the asset class.

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3 Things the European Investment-Grade Fixed Income Team Talked About Last Week

 

Greek Euro Coin

1. Inflation – Down Down, Deeper and Down
Perhaps the reason that global bonds initially rallied was that the Renminbi (RMB) move was seen as a global deflationary move. A weaker RMB (and other Asian currencies) should mean weaker commodity prices, and lower U.S. and European import prices. However, oil is probably the main driver behind some of the big moves in the inflation markets. This week West Texas Intermediate (WTI) fell to a 6.5 year low. The reason? In our opinion, not so much a lack of demand, but rather a surplus of supply. The International Energy Agency described global oil supply as growing at “breakneck speed”. Coupled with modest demand growth, the situation might suggest further downward pressure on the oil price before a bottom is found. Little wonder then that inflation breakevens globally are falling back towards recent lows. The market appears to be moving away from expecting a pick-up in inflation, to expecting falling inflation again. That could happen in the short-term, but longer-term we believe inflation will move higher.

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