The current debate about currency wars, the G20 meeting, QE2 (quantitative easing by the US Fed), it all makes for great Op-ed opportunities and commentary. One relevant question we prefer to focus on is that of asset pricing implications (preferably in the medium-term) and how to position our portfolios accordingly. This note is not a read more

We are at an interesting junction in the markets, with this non-trivial rally in front of significant uncertainties around the world: elections in the US next week as well as very relevant announcements expected from the Fed, while global rebalancing is being ‘designed’, the EU discussing major institutional reform and the developing world continues to read more

A boring second round electoral process -as the victory of the ruling party candidate Dilma Roussef (PT) seemed certain- gained momentum last week when results of some polls became public.   Particularly, a poll by CENSUS showed an evident shrink of her advantage, with José Serra standing only 4 percentage points behind (see table). But the read more

The still incipient September market recovery appears to respond to data that negates the double-dip view and increases credence to the gradual recovery view. Our approach has been to cautiously position for the latter, within a broader theme of a structural change in favor of EM and other non-G7 countries. In other words, we continue read more

The high volatility of the last few months has generated panic moments in the markets, perceived uncertainty about future scenarios, and sharp inconsistencies in some of the public policy debates. Though there are reasons to marginally re-shuffle the probability distribution among the most likely scenarios, there is no real reason to change the base-case scenario. read more

Over the last 10 days a sequence of shocks have shaken confidence on the recovery. Those shocks have more of an impact on sentiment than on the fundamentals that comprise our medium-term base-case scenario. But the market impact of those shocks has been significant, which is why a reassessment of that scenario is due. The read more

Last week Dubai World’s announcements generated a major shock. It triggered a new debate about excess liquidity, bubbles and re pricing. In that framework, it would be expected that the emerging markets would suffer the most. We believe that the volatility caused by the Dubai World news will not generate a big spill-over-effect, and most read more

Volatility has increased since last week. Even though we considered reducing risk in our portfolios, we decided not to do so. We do not think it is the right time to take any actions. We believe that the increase in the observed volatility could be explained by three main topics, some appear to be more read more

In the last three days the markets seem to be signaling that something has changed. The non US stock markets that had previously recovered the most are now the biggest underperformers. Commodities are showing the same underperformance. The dollar is slowly recovering. It seems that the market is testing the general consensus that the rest of read more

The Brazilian government decided to increase the tax to capital inflows (with the exception to direct investment). This is a bad policy but is not enough to overturn the country’s attractiveness to international capital inflows. Capital controls increase the cost of foreign investment for the economy and therefore diminishes potential growth. The Brazilian government took read more