Rundown@30th Aug to 12th Sept'20

1. Europe looks relatively strong and better than other developed equities, given strong economic high frequency data. It is very interesting that EUR has soared against USD but the European equities have underperformed US and show proper negative correlation. That’s probably because the European indices are heavy on international trade and strengthening currency is a bane for them.

2. Weakening dollar is good for companies with high foreign sales, furthermore this would help boost their exports. We see a strong relation between dollar decline and foreign corporate profits. And now since we see dollar moving lower every day, this is a boon for the foreign capital profits.

3. A lot of investments have been tied to the rising inflation targets and its growing trend across geographies. If it does not materialize the way we plan to, people can lose big money.

4. Furthermore we have observed assets betting on inflation much more than what even high inflation can lead to, and that makes us question their inflation expectations.

5. Another possibility being discounted by the strategists are the potential Fed cut back on stimulus and that could lead to dip in the figuratively overvalued stocks. (as indices have crossed pre virus levels)

6. Mortgage rates in the UK have gone up even in times when the benchmark rates are cut continuously by the CB. This reflects the decorating collateral quality and rising fear of defaults. Furthermore, this has become a problem for the younger ones, entering the jobs market with limited savings. This reflects that banks are still not sure about the repayment schedule and thus prefer parking their extra cash back with the Central Banks.

7. Though we see US China relations rupturing on the tech and intellectual property front, they seem to collude on the financial space. With companies preferring a HK listing than a NY public market, reflects the potential of Asian markets.

8. Vanguard moving out of China and other public funds management business, saying that it is more demanding and less profitable with players crowding the space, rather they are shifting gears to robo advisory but entering into a JV with Ant Group.

9. Yuan as a store of value and safe haven?- Yuan has been one of the best performing currencies in the world in times of crisis, this goes to show the resilience in the currency and its probable status to hold uptight during turbulent times.

10. This can be attributed to the tighter capital controls imposed by the state on foreign capital and domestic international payments, in addition to the narrative of China being the only economy to expand this year.

11. Fed policy to revise its inflation forecast, is also understood as a trigger to make people start consuming today, than to delay their buying decision. This can perhaps raise price levels before forecasted.