The Swissie seems indeed to be the funding currency of choice nowadays. Just yesterday JPM put out a note on it. Main argument is that I) in case of a resolution in Iran / cyclical recovery should underperform, ii) if we stay where we are inflationary pressures should keep mounting and rates are going to stay elevated which should pressure low yielders,iii) while the only scenario in which the Swiss’s should outperform it’s a full blown recession. That’s one of the few currencies (maybe with AUD and NOK) backed by a sound fiscal policy seem to not matter that much for markets here.
Great piece. Quick question on your risk process: when you’re long an asset and signs emerge that these passive flows and CTAs have pushed the trade way too far into overextended territory, do you have a specific framework to monitor that? And in those scenarios, do you ever put on tactical downside hedges to protect the position, or do you just rely on your core macro thesis to ride out the distortion?
always a great investment opportunity when CTAs move markets for wrong reasons, needs time to in my investment career always bet against CTA models and was 95% right within 1-2y...
The Swissie seems indeed to be the funding currency of choice nowadays. Just yesterday JPM put out a note on it. Main argument is that I) in case of a resolution in Iran / cyclical recovery should underperform, ii) if we stay where we are inflationary pressures should keep mounting and rates are going to stay elevated which should pressure low yielders,iii) while the only scenario in which the Swiss’s should outperform it’s a full blown recession. That’s one of the few currencies (maybe with AUD and NOK) backed by a sound fiscal policy seem to not matter that much for markets here.
Great piece. Quick question on your risk process: when you’re long an asset and signs emerge that these passive flows and CTAs have pushed the trade way too far into overextended territory, do you have a specific framework to monitor that? And in those scenarios, do you ever put on tactical downside hedges to protect the position, or do you just rely on your core macro thesis to ride out the distortion?
All depends... but would I look at most is an asset not trading as I expect. If the Fed suddenly went dovish and gold did not move, then its gone.
always a great investment opportunity when CTAs move markets for wrong reasons, needs time to in my investment career always bet against CTA models and was 95% right within 1-2y...