January, 21 2016 by lsr team

Not all the countries have joined in the global currency war. To some of the currencies most exposed to the slowdown in Chinese growth and associated deflation currency pegs are a symbol of normalcy; a signal to investors and speculators alike that the strains wrought by falling prices are only temporary difficulties. No one should be fooled; at best these pegs are illusions of stability and in many cases are making a difficult position worse. In this note we look at the two dollar pegs frequently mentioned in client queries; the Hong Kong dollar (HKD) and the Saudi Arabian...

January, 13 2016 by lsr team

Last year we outlined a view of the oil price suggesting that the floor of around $40 per barrel that held during much of 2015 would continue to provide support during the first half of 2016. We saw the risk to prices remaining strongly to the downside and firmly ruled out any near-term rally. With the New Year ushering in fresh growth concerns, these risks are starting to be realised. Nevertheless, even at current levels the main threat is that prices move lower still. So where do oil prices go from here? We think the oil price could fall as low as $20, but unlike the f...

January, 06 2016 by lsr team

To Western investors, many sitting down in front of their terminals for the first time since the Christmas break, Monday’s sell-off was a reminder of the risks they will face during 2016. In fact, in 38 of the last 50 years the price action of US stocks in January has set the direction for the full year. So amid the anecdotes and clichés of popular market commentary, Monday’s plunge was reckoned to be especially significant. But how much did January 4 2016 really tell us about the rest of the year? Click below to find out why the wall of worry will be...

January, 04 2016 by lsr team

Happy New Year! Having sifted through various sell-side reports, we conclude that our emerging market view is more on the bearish side. While we have a constructive stance on some EMs, India and Mexico in particular, our general tone is still one of caution. For more details, please request a copy of our year-ahead piece -2016: Don’t panic, yet! In today’s note, we address three key questions: 1) Why are we more bearish than consensus on EMs? 2) What would make us more optimistic? 3) What would make us more negative? Click below to find out more.

December, 09 2015 by lsr team

Twelve months ago we said 2015 would be a year of ‘deceptive calm’. With the S&P 500 up 5% and US 10-year yields around 5bps higher, you could say our forecast was accurate. Markets spent much of the year in an anxious state, fretting about Greece, then China, then the risk of a synchronised global recession. In 2006 and 2007, LSR had a high conviction that a financial meltdown was about to wreak havoc on the global economy. This time around we stick with our 2015 theme ‘Keep Dancing’ but with no great conviction. Looking ahead to 2016, China...

November, 04 2015 by lsr team

The drop in oil price since mid-2014 has been especially abrupt due to a huge positive supply shock that has magnified the impact of a decline in demand for commodities. US oil production has increased by almost five million barrels per day (mbd) over the last five years. Moreover, the re-admission of Iran to the global oil market will further increase near-term supply by around one million mbd. But with persistent oversupply, along with some uncertainty about remaining storage capacity, could oil prices remain at the $40p/b floor we outlined at the start of 2015? Click...