Central Bank Tools of Intervention: Reverse Repos versus QE

In mid-September, there has been a liquidity crisis in the money market of secured overnight borrowing. We have analyzed this in an article published one month ago, headed “Liquidity Squeeze: What is the Repo-Scarcity Premium?”. Since then, the Federal Reserve proceeded to inject more than 230 billion over the period from the end of September […]

Liquidity Squeeze: What is the Repo-Scarcity Premium?

How expensive can it be to borrow USD cash for one night collateralizing fully with the US Treasuries? Given current rates, perhaps somewhat above 2% would be reasonable. What about 10%? This is how much some of the participants in the USD Repo market had to pay to provide themselves with liquidity on the 16th […]

A Double Edged Sword of the US Economy

Introduction As we noted in our final publication of 2017, the year 2017 was characterized by very low volatility and stable positive returns on the majority of stock markets. This took place even despite the start of stimulus withdrawal by major central banks which was seen in the gradual increase in the target policy rates […]

The FED Model: Illusion or Reality?

The aim of this article is to analyse the popular Fed Model, pointing out its strengths as a descriptive tool but warning investors against its alleged predictive qualities. The Fed Model is a stock valuation approach introduced in the late 1990s. It asserts that the acceptable earnings yield (the inverse of the PE ratio) for […]

The FED and the Balance Sheet: Shrinking the Giant

Trump’s election and his plan of loose fiscal policy put upward pressure on US inflation. In order to cool down the economy on the verge of full employment, FED raised rates in December and March and has promised two other hikes in 2017. Hiking fed fund rates is not the only approach the FED can […]

Market Recap 23-04-2017

United States Amidst continued geopolitical uncertainty and mixed corporate earnings results, US equities experienced a week of sideways movement. Later in the week however, the major indices recovered some of their previous week´s losses as confidence in president Trump´s tax reforms strengthened again. US treasury secretary Steven Mnunich announced that a proposal for the tax […]

Market Recap 09-04-2017

United States US stocks took a break after last week gains. The S&P 500 fell 0.3% closing the week at 2355.54, while large-caps were flat with the Dow Jones at last week’s levels. One of the major drivers of financial markets was the FED releasing the minutes of its mid-March meeting. The minutes highlighted the […]

Market Recap 02-04-2017

United States The S&P 500 closed at $2,362.72, up 1.44% when compared with the beginning of the week, where opened at $2,329.11 following concerns about President Trump’s ability to secure the passage of the tax reform after failure of his healthcare reform. The other major U.S. equity indices, the Dow Jones Industrial Average and NASDAQ, […]

Market Recap 12-03-2017

United States The S&P 500 closed at $2,372.60, slightly depreciating when compared with the beginning of the week, where it was standing at $2,375.32, but still higher than the weeks’ low of $2,357.98. Similar was the fate of both the Dow Jones Industrial Average and the NASDAQ, as they closed at slightly lower levels than […]

Market Recap 05-03-2017

Market Recap 05-03-2017 United States Despite experiencing a downward correction towards the closing of the week, US equity indices reached new record levels. The Dow Jones Industrial Average reached a new record level by breaching the 21.000 mark. On Wednesday, it peaked at 21.115, to close the week at 21.005, its first loss in a […]

Trumponomics: Profit with Inverse ETFs

This article will introduce an unconventional way to profit when interest rates rise using inverse ETFs. We will show the upsides and downsides of these tools, focusing on how they could be used in today’s American market. Inverse ETFs could be a useful tool to deal with the possible future bear shift in the bond […]

Market Recap 06-11-2016

United States On the week ended November 4th, election uncertainty overshadowed improving fundamentals and sent US stocks to their ninth consecutive decline. Over the week, the Dow Jones Industrial Average declined -1.0% to 17978, the S&P500 Index declined -1.4% to 2097.40, and NASDAQ declined -2.1% to 5080. The last heavy batch of third-quarter earnings also […]

Market Recap 30-10-2016

United States Disappointing earnings from Apple and Amazon heavily weighed on the Nasdaq, falling 1.3%. Positive surprises from large companies, such as Procter & Gamble, helped to offset some disappointments in the tech sector, resulting in the S&P 500 falling 0.7%. So far, the earnings seemed solid, as this is the first quarter with positive […]

Market Recap 09-10-2016

United States The main news in the United States this week was the job report published on Friday which revealed that job gains of 156,000 jobs were slightly below consensus estimates of 175,000 in September. The key takeaways of the report are that the job growth is healthy even though the hiring momentum has slowed […]

EM Currency: Turning Point?

This year has been particularly good for emerging markets and there are several reasons underlying the so-called EM rally. The main one is probably the yield hunt, in which yield-hungry investors move to riskier assets in order to have some decent return in the low interest rates environment, thus boosting risky assets and compressing risk […]

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