ECB Preview: Downside Risks to the Euro
Jeff Haessler, Founder & CEO
June 5, 2017
In our view, the risks over the June ECB are tilted toward short-term Euro weakness. First, speculative positioning recently turned net long and is now at its longest level since May 2014. Second, inflation data have come in slightly below expectations and inflation pressures remain subdued. Finally, ECB speaker sentiment remains tilted toward the dovish side.
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Trading the FOMC Statement: What Moves Markets?
Jeff Haessler, Founder & CEO
May 16, 2017
As Fed communications have evolved, the actual policy rate has become an afterthought compared to the tone of the statement and changes in economic forecasts. Among the materials released by the Fed, we find that the sentiment of the policy statement and revisions to the dot-plot are the most important predictors of the market reaction, while inflation and unemployment forecasts carry little value. Using these results, we present an indicator which demonstrates statistically significant explanatory power for market reactions to FOMC policy announcements.
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Tactical Asset Allocation using Fed Sentiment Data
Jeff Haessler, Founder & CEO
March 27, 2017
In this article, we construct a leading indicator for shifts in the business cycle using Fed speech sentiment data.
Using this data, we present a tactical asset allocation strategy: overweight bonds when the Fed is dovish and underweight when hawkish.
Over the past 15 years, this strategy outperformed a 60/40 benchmark portfolio by 1.5% annually while reducing volatility by 2%.
With the Fed currently leaning hawkish, our strategy suggests a modest overweight to US equities relative to treasuries.
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