About

Ahead of the Curve provides analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity, and FOREX markets are discussed. Rajveer Rawlin is a PhD and received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher, having followed capital markets in the US and India since 1993. His research interests include capital markets, banking, investment analysis, and portfolio management, and he has over 20 years of experience in the above areas, covering the US and Indian markets. He has several publications in the above areas. He currently teaches business and management students at CHRIST University. The views expressed here are his own and should not be construed as advice to buy or sell securities.

Wednesday, 6 December 2017

Yield Curve about to Invert?

The spread between 10 year US bonds and 2 year US bonds is currently at 5 year lows and will likely go negative post the fed rate hike next week. This would most likely cause the US yield curve to eventually invert and is a harbinger of a decelerating/recessionary economy going forward. Will tax cuts save the day? I doubt it.

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Economic Calendar

GMT-4		Event	Actual	Consensus
Tuesday, Jun 17
08:30	US	Retail Sales (MoM)	-0.9%	-0.7%	Revised from 0.1%
08:30	US	Retail Sales Control Group	0.4%		Revised from -0.2%
08:30	US	Retail Sales ex Autos (MoM)	-0.3%	0.1%	Revised from 0.1%
08:30	US	Retail Sales (YoY)	3.3%		Revised from 5.2%
08:30	CA	Foreign Portfolio Investment in Canadian Securities	$-0.01B	$-2.94B	Revised from $-4.23B
08:55	US	Redbook Index (YoY)
09:15	US	Industrial Production (MoM)		0.1%
09:15	US	Capacity Utilization		77.7%
10:00	US	Business Inventories		0.0%
10:00	US	NAHB Housing Market Index		36

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.