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Falco Group
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Articles, Commentary & Analysis
A Game of Chicken?
11th March 2019
Falco Group
In a conference panel discussion this week in Singapore, we found ourselves amongst friends as we debated events in the markets. One of the panellists characterised times like a ‘game of chicken’. Investors know they want to get out of markets, but they also fear missing out on the last phase of the rally. As another panellist more brutally put it, we are on a runway over a cliff, but the Federal Reserve just lengthened the ...
Trusting G7 consumers to offset China slowdown
4th March 2019
Falco Group
Given the sharp rally for risk assets since the start of 2019, investors are eager to detect the green-shoots of a growth revival as spring beckons. As we said in last week’s note, much of the focus is on the state of China's economy and progress in trade talks with the US. The coming weeks will be pivotal in convincing markets that a rebound is underway across G7 economies. A homegrown impetus looks to be the priority, especially in the eurozone as global trade growth fades...
Have Markets Over-discounted the Good News?
25th February 2019
Falco Group
The ongoing strong performance of equity markets and higher risk bond markets, in essence, is saying the macroeconomic data is wrong and that things will get better. Since the start of the year, global equity markets have risen 11% while the global economic data has mostly disappointed. The market has taken it at face value that an agreement on trade between China and the United States may be at hand. However, our medium-term concern...
When Good News and Bad News is Good News
18th February 2019
Falco Group
Global risk assets remain supported by the drip feed of good headline news. The re-opening of the US government and the hopes that China and the US may find a way forward on the trade talks is good for the markets. However, in the absence of these news stories the backdrop remains challenging. GDP growth forecasts continue to slip, and the Brexit problem is far from resolved. The market is in one of those moods where ...
Moving Away from Reality …. Again
11th February 2019
Falco Group
There was always room for a rebound. However, the year-to-date performance of risk markets such as corporate bonds and equities has been quite remarkable. Last week may have seen a pause in their performance, but the scale of money flowing back into these risk assets bodes well for markets at least maintaining their elevated levels for the moment...
The US Federal Reserve – Fearing their Own Shadow
4th February 2019
Falco Group
The angst in the Federal Reserve is almost palatable. Every time there is strong US economic data the Federal Reserve intimates that they are going to stick to their plans of increasing interest rates and reversing quantitative easing. However, as soon as the market fears the Fed will really carry out their plans, the financial markets sell-off. And, as soon as the markets sell-off the Fed gets worried and seemingly backtracks...
Let’s Hope the Good News Keeps Coming - but don’t Rely on the Eurozone to Deliver
28th January 2019
Falco Group
Risk markets have continued their rebound through the early weeks of the year. However, as our feature article on the eurozone explains there are still structural challenges ahead. In the near term, it feels like equities can make a little more progress. The S&P 500 at 2664 appears to be targeting the 2700 level with a shot at the peak of the fourth quarter of 2800...
Trade War Compromises and Populist Impasse
22nd January 2019
Falco Group
Financial markets were in a more positive mood last week with hopes for a compromise on the US- China trade war offsetting the impasse in both the US (government shutdown) and the UK (Brexit). In the UK the markets managed to put a positive gloss on the UK parliamentary vote that saw Theresa May’s government lose the vote on its Brexit motion by a record margin...
It’s Getting Foggy Out There
14th January 2019
Falco Group
As we outlined last week, policymakers are struggling to come to terms with the volatility in the markets. The Fed Chairman, Jerome Powell in a speech this past week put up more fog around future policy. President Trump’s plans remain solely focused on egotistical belligerence to keep the US government closed while petulantly waiting for the funding of a Mexican wall. Meanwhile, this week the UK faces its moment of truth...
Now for the Policy Response
7th January 2019
Falco Group
So, the collapse in financial markets finally got to them. The policymakers had to respond to the damage in financial asset markets eventually. Fed Chairman Powell was the first major policy maker to blink. In his speech last Friday, he held out an olive branch to the financial markets by saying "with muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves”...