Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>Re-configured US Fed is becoming more hawkish towards inflation</li>
<li>Bond market term structure warns of near-term economic troubles
</li>
<li>Expect a ‘catch up’ with faster QE taper by US Fed</li>
<li>Inflation is transitory but ‘sticky’. Disinflationary forces will ultimately reassert themselves</li>
</ul>


Re-configured US Fed is becoming more hawkish towards inflation
Bond market term structure warns of near-term economic troubles

Expect a ‘catch up’ with faster QE taper by US Fed
Inflation is transitory but ‘sticky’. Disinflationary forces will ultimately reassert themselves


Watch-Out For The Fed’s Big ‘Catch-Up’

Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Here are our main takeaways from the analysis of daily asset rotation using a 60/40 U.S. stock/bond mix as a benchmark for USD investors.•     The S&amp;P 500 is in the leading quadrant and shows no signs of weakness. The market is on track for a rally into year-end. The open question is whether value or growth stocks will lead the charge.•     Bond prices are in the lagging quadrant but showing signs of improvement. In particular, long Treasuries (TLT) is on the verge of rising into the improving quadrant. Much depends on the language from the FOMC meeting in the coming week.In the wake of a hawkish surprise from the Bank of Canada last week, the market began to price in an aggressive tightening cycle by global central banks as yield curves around the world flattened. Will the Fed also turn hawkish in reaction to market expectations and rising inflation pressures to pull the tightening schedule forward, or will it stay the course, which would be a dovish outcome?The Fed’s tone will also matter to equity market leadership. The value/growth relationship has been correlated to bond yields. A dovish Fed would be value bullish and a hawkish tone would be growth bullish.

Here are our main takeaways from the analysis of daily asset rotation using a 60/40 U.S. stock/bond mix as a benchmark for USD investors.•     The S&amp;P 500 is in the leading quadrant and shows no signs of weakness. The market is on track for a rally into year-end. The open question is whether value or growth stocks will lead the charge.•     Bond prices are in the lagging quadrant but showing signs of improvement. In particular, long Treasuries (TLT) is on the verge of rising into the improving quadrant. Much depends on the language from the FOMC meeting in the coming week.In the wake of a hawkish surprise from the Bank of Canada last week, the market began to price in an aggressive tightening cycle by global central banks as yield curves around the world flattened. Will the Fed also turn hawkish in reaction to market expectations and rising inflation pressures to pull the tightening schedule forward, or will it stay the course, which would be a dovish outcome?The Fed’s tone will also matter to equity market leadership. The value/growth relationship has been correlated to bond yields. A dovish Fed would be value bullish and a hawkish tone would be growth bullish.

<ul>
<li>Steepening US Treasury curve obscures its more important message of flattening long-end and rising convexity</li>
<li>Policy rate expectations are rising and term premia are falling
</li>
<li>Investors’ positioning consistent with ‘stagflation’ outlook and higher credit risk</li>
<li>Bond investors are starting to believe Fed policy-makers will make a mistake
</li>
</ul>


Steepening US Treasury curve obscures its more important message of flattening long-end and rising convexity
Policy rate expectations are rising and term premia are falling

Investors’ positioning consistent with ‘stagflation’ outlook and higher credit risk
Bond investors are starting to believe Fed policy-makers will make a mistake



A Major Policy-Error? The Fixed Income Markets Think So

<ul>
<li>Investment cycle is in late-stage Speculation, with Turbulence next up</li>
<li>Falling Global Liquidity a major head-wind. Liquidity turns sub-par by early-2022</li>
<li>Start to consider Volatility-based investment strategies and more cash</li>
<li>Traditional economic analysis provides little help in asset allocation. Flow of funds analysis works far better</li>
</ul>


Investment cycle is in late-stage Speculation, with Turbulence next up
Falling Global Liquidity a major head-wind. Liquidity turns sub-par by early-2022
Start to consider Volatility-based investment strategies and more cash
Traditional economic analysis provides little help in asset allocation. Flow of funds analysis works far better


Is There A Bear Out There? Where Are We In The Global Investment Cycle?

<ul>
<li>Inflation fears are being fulfilled. High pass-thru of price shocks</li>
<li>Policy-makers will react (wrongly) by hastening ‘tapering’</li>
<li>This may trigger upcoming ‘liquidity crises’, and</li>
<li>Risk sharper World economic slowdown</li>
</ul>


Inflation fears are being fulfilled. High pass-thru of price shocks
Policy-makers will react (wrongly) by hastening ‘tapering’
This may trigger upcoming ‘liquidity crises’, and
Risk sharper World economic slowdown


United States

iShares 20+ Year Treasury Bond ETF is an exchange-traded fund incorporated in the USA.  The ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. 

iShares 20+ Year Treasury Bond ETF (TLT US)

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iShares 20+ Year Treasury Bond ETF (TLT US)

Watch-Out For The Fed’s Big ‘Catch-Up’

Inflation is a near-term political threat in the US and will trigger a more hawkish response from the US Fed. This will unsettle stock markets, but...

Michael J. Howell

Waiting for the FOMC

In the wake of a hawkish surprise from the BoC, the market began to price in an aggressive tightening cycle by global central banks as yield curves...

Cam Hui

A Major Policy-Error? The Fixed Income Markets Think So

Fixed income markets are starting to fear a coming 'over-tightening' policy error by the US Fed. This is highlighted by looking inside the term...

Michael J. Howell

Is There A Bear Out There? Where Are We In The Global Investment Cycle?

Asset allocation should be shifted more defensively in anticipation of major headwinds from slowing Global Liquidity growth in 2022

Michael J. Howell

Bad News Is Closer Than You Think

Markets are too complacent to 'transitory' inflation risks and to the absence of Chinese stimulus. There is a risk of another 'liquidity crisis'...

Michael J. Howell

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