FX FUNDAMENTAL ANALYSIS
We would like to add just a couple more thoughts in the big picture. First, the US consumer may be running on fumes. Te household savings rate has collapsed, and as a result growth remains reasonable. At the same time, consumer debt is increasingly dramatically just at the point when interest
rates are
rising. Tere is a strong case to make that unless households can find a new source of income, rising interest rates and inflation will impact both consumer spending and therefore the economy.
All of these thoughts need to be fleshed out, and we will attempt to do so in the weeks ahead. However, as we sit here watching equity markets melt up, retail investors piling in at record
the equity market party feels like a great place to be and there is a huge inertia and fear of missing out.
We are also acutely aware that either our concerns may be mis-placed, and that it could take a long time for
them to
matter even if we are correct to be concerned. So, for the moment, our concerns remain focused on
bonds
the US Dollar, and even in the short term, we wonder whether the
Dollar
Te second thought is on oil. At $65 on US WTI, this represents an increased burden for the US consumer compared to a year or two ago, and a potential boom for US shale. If the US consumer begins to retrench at a time when US policy is becoming more isolationist and
the US continues its shiſt
towards energy self-sufficiency, this will reduce the US current account deficit, adding a further strain to the Dollar standard that has been in place since 1971.
44 FX TRADER MAGAZINE April - June 2018
The dark side of the Dollar Standard is that it has led to an unparalleled growth in debt in virtually every country and every sector
levels and reliable valuation measures at levels comparable to 2000 and 1929, we begin to worry that a collapse or large shiſt to the Dollar standard would come as a huge shock to the global system. We are watching the rise in US bond yields, the decline in the US Dollar and the policy shiſts occurring on the global stage, and wonder whether these are indeed major warning signs that investors are ignoring simply because
some in
particular is oversold and due of
sort relief rally.
However, with market valuations so
do
stretched, we think
that
equity investors need to have their exit plans at the
ready. So far in 2018, we have seen volatility inch up across
the major
assets, and with everything else noted above, we wonder aloud whether an increase in market volatility could be the harbinger of greater change in the months ahead.
Stewart Richardson
Chief Investment Officer RMG Wealth Management
and
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56
