What is the key determinant moving markets?

UBS Investor Forum – July 2016

https://www.ubs.com/global/en/wealth_management/chief-investment-office/ubs-investor-forum.html

 

Topic 2. What is the key determinant moving markets?

  1. central bank policy
    – central bank are able and committed enough to create reflation, then this will be fixed income bearish in terms of high duration
    – next 6 to 9 months, rates, what happens and what passed, in particular the fed’s
    – almost the half of the FOMC are not economists, they are lawyers, that’s actually a serious problem: a legitimate issue that move away from economic model, you tend to end up with instinct policy making
  2. economic fundamental
    – fed is irrelevant now, it’s all about global growth because this is missing, it’s the lack of global growth, the lack of investment, still pretty low business confidence
  3. politics
    – that’s thing people underestimating and making people change their view on fixed income quickly

 

 

Topic 1. Hedging – portfolio protection in uncertain times

How to hedge and what instruments to use in uncertain times

UBS Investor Forum – July 2016

https://www.ubs.com/global/en/wealth_management/chief-investment-office/ubs-investor-forum.html

Topic 1. Hedging – portfolio protection in uncertain times

Risks:  1  debt burden especially in the EU
              2 monetary policy (either exhaustion or helicopter money)
              3 politics
              4 China lands harder
              5 lack of growth in the medium term (helicopter money)

 

Hedge:  1 hedging European risk by being underweight peripheral bonds
                2 hedging European curve by using the US interest curve, which is so flatten, mostly negative (How far more negative the boom can go?)
                3 hedging lack of growth by being overweight gold, though it’s boring
                4 sell calls on Oct or Aug on European indexes, and buy them in next month (July), a calendar that inherently short volatility but long gamma, which is supposed to cost 10 basis point and make 3 or 4 percent
                5 underweight Austrian dollar versusoverweight the US dollar
                6 no way to hedge, market move almost instantaneously after seeing a result
                7 hedging risk is also hedging all the return potential, so one should find out relative value, pricing opportunity in firms