NN IP: The Big Short

Economic Outlook: Central banks become more unconventional

Last week we described four weak links in the global economy which are very much on the mind of global investors (China/EM risks, Fed tightening in an imbalanced world, non-linear decline in oil prices and weak global supply). What's more, because of the near death experience of the global financial system in 2008/early 2009 investors are still subject to "dread risk", i.e. an excessive focus on and sensitivity to downside risks and negative news. Not surprisingly, this mix will tend to create relatively elevated and volatile risk premiums. Read more...

Asset Allocation: Markets are overpricing downside risks

Investor pessimism has reached very high levels, as have investors’ cash positions. Combined with renewed commitment from central banks to provide support and tentative signs of bottoming oil prices, this creates the risk of short squeezes of the risk aversion trades that investors are holding currently. Read more...

Fixed Income: Environment for EMD has improved recently

Increasing concerns about DM growth have pushed out expectations of Fed interest rate hikes. The resulting decline in DM bond yields and a weaker US dollar have created a more favourable global liquidity environment for EM assets. Read more...

Commodities: We moved WTI crude oil and zinc to small overweights

Nearly all major commodity segments are characterized by excess supply. Slowly but surely, though, signs of production discipline are increasingly evident in selected commodities. These are the places where we prefer to go long. Read more...