Market dynamics changed some time in October, as we switched from watching and fearing mostly external factors and risks, to now being mostly dependent on its own fundamentals and risks. The global business cycle is now the key market factor. During the last 3-4 years the volatility in markets (therefore the downside risks) was mostly read more

Thanks to Russia’s surprise intervention, Syria appears to have faded as a relevant source of risk in the short term. The new initiative was good and bad for President Obama, as it did save him from a difficult fight in congress, but it also left his credibility and leadership damaged. That blow to the credibility read more

Every time an event causes a significant market move, like the recent ‘tapering’ discussion has done to international markets, the difficult question to answer is whether it is a transitory of a more permanent phenomenon. If the discussion is mostly noise, without a relevant impact on fundamentals, then it is bound to pass and making read more

April has so far been very volatile, as a result of the struggle between fundamentals showing incipient signs of a deceleration that brings fears of a now frequent seasonal pattern, and central bank liquidity on the other hand. Investors have grown fearful of every short-term correction, and the time of the year brings back memories read more

Early enough in my career in research somebody told me I focused too much on how things should be as opposed to how things are likely to be. Clearly, when in the business of mapping reality to asset prices, what it should be is less relevant than what it is likely to be. For many read more

The elections last night mean no real change with respect to the political deadlock that produced so much noise during the debt ceiling negotiations in 2011. The results from last night do not produce a material change to incentives, even though they can be interpreted as a message for ‘balance’ in the approach. Though we read more

Gradually two of the three main risks in the markets appear to have been moderated, while the third is quickly intensifying. The European Central Bank (ECB) has eliminated the tail-risk when it provided the conditions upon which it would put its balance sheet to help bailout Spain and Italy, if necessary. Economic data in China read more

A few days ago we underwent a reallocation of risk due to the increasing divergence between markets and real fundamentals. We are not secularly bearish, in part because it is difficult to see asset prices fall when faced with the wall of liquidity central banks are producing. But asset prices (equities in particularly) went from read more

The volatility of the last few months made many people believe 2012 would be a repeat of 2011. We do not see much value in looking for insight about the future in past patterns or charts. A lot has changed since last year, though the main risks remain the same. We believe the risk distribution read more

After more than 2 years of the euro crisis coming and going, something of a catharsis is possible with the next Greek elections and its potential exit. The Spanish bank bailout announced over the weekend is part of the effort to isolate the rest of the Eurozone from a potentially very negative shock. Markets clearly read more