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With the Pacific G10 Macro Rates Team 
Last week real yields in the US finally increased (nominal – inflation), it also correlated to equities peaking. They (equities) have stopped viewing higher rates as a positive reflection of growth, towards one of an unsustainable tax on the economy. Whether rising real yields is a permanent feature, will be key to equity market direction for the next few months.  

With the Pacific G10 Macro Rates Team 
Last week’s strong uptick in European cpi did not follow on in the USA or China as their same measure came in lower than expected. However, this did not fear the market as more positive news came from many corners: including strong Norwegian and UK Q4 GDP data, with the chief economist of the BoE referring to the UK economy as a “coiled spring”; US Jobless claims hinting at a more positive outlook; higher oils prices (currently viewed as a predictor of stronger future growth); Macro prudential restrictions were reintroduced by the RBNZ to dampen the hot NZ mortgage market; and BUBAs Weidmann forecasting German HICP strengthening to 3%. 

With the Pacific G10 Macro Rates Team 
The week started with Chinese PMI data pulling back a little but remaining in expansionary territory. The most interesting central bank activity stemmed from Australia and the UK. 

With the Pacific G10 Macro Rates Team 
Last week equity markets stole the show. The world’s leading capitalist nation demonstrated a lack of irony as a platform called Robinhood redistributed profits away from the (rich) hedge funds to the (poor) retail investor. Short positions were squeezed mercilessly, and equity funds deleveraged as a result. At the peak of the mayhem, the platform halted trading access to retail clients whilst still allowing institutions to trade. This raises a whole new line of enquiry about the ethics and legality behind such an action. With the volatility increase, exchange margins have been raised and positions decreased, along with rumours that it was other hedge funds acting behind the cloak of the “hooders” who were squeezing the shorts. Potential ripples outside of Long-Short equity funds have not surfaced yet, and it seems that the event might be contained. 

Emerging Markets Webinar with North of South Capital

Pacific Asset Management recently hosted a live Emerging Markets webinar with Matt Linsey and Kamil Dimmich, Co-Managers & Partners from North of South Capital, the highly experienced investment managers of the Pacific North of South EM All Cap Equity Strategy.  

Latest G10 Macro Rates Blog
With Shayne Dunlap, Co-Portfolio Manager

The title above was a quote lifted directly off a chat room used by retail investors to describe the current revolution of burning down the house. In this case “the house”, ironically, is hedge funds that specialize in short selling. Short selling is where investors are willing, after careful analysis of the balance sheet and economic prospects of a company, to sell the shares of that company. If/when the share price goes down, they can cover back their short at a profit. A purchaser of a share can lose 100% of their investment, the seller can lose multiples of their investment if the share price spikes higher. This is exactly the scenario that has played out recently with GameStop stock and Melvin Capital. 

With the Pacific G10 Macro Rates Team 
The week opened to another strong Chinese number showing Q4 GDP at +6.5%. It was then down to G10 central bank announcements to make up for the lack of market noise due to the MLK holiday and the Biden/Harris presidential inauguration stealing attention. Italy provided some late political volatility as the 66th post WW2 government coalition fell apart on differences in the spending of EU recovery funds. 

With the Pacific G10 Macro Rates Team 
Last week saw the market re-appraised the odds of tapering in the US, after the FOMC re-emphasised it would be a function of economic resilience. This was interpreted as a pushback on timing and resulted in the benchmark UST 10yr backing down below 1.10% after touching a 10-month high 1.18%. 

With the Pacific G10 Macro Rates Team 
Welcome to the first Pacific G10 Macro weekly for 2021, which continues the madness of 2020 with harsh lockdowns and an attempted “coup” in Washington DC. The only predictable event was both sides claiming a victory after the eventual resolution of a trade deal on Brexit. Elsewhere positive numbers were reported from China, Taiwan and South Korea on trade, export, survey and industrial production. These announcements led to a stock indices putting in healthy returns for the end of year and a relatively limited response from government bonds. 

CIO Monthly View with Will Bartleet, CIO and multi-asset portfolio manager at Pacific Asset Management

Equity markets rounded off an extraordinary year with gains in most markets. The global roll out of the vaccine for COVID-19 began in the UK, which was the first country to approve the Pfizer/BioNTech vaccine. The UK’s Medicines and Healthcare products Regulatory Agency also approved the AstraZeneca/Oxford University vaccine which has the advantage of being able to be stored in a conventional refrigerator, easing the distribution challenges of the Pfizer and Moderna vaccines.