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.

Showing posts with label high yield. Show all posts

Monday, 7 December 2015

Head Winds for Global Financial Markets Going Forward

1) Collapsing Oil:

Oil has entered into a free fall post OPEC and is not looking to stabilize anytime soon. This has deflationary implications:

2) A Weak High Yield Market:

Collapsing oil is definitely creating trouble for high yield issuers in the Oil market. Rig counts have almost halved and the high yield ETF is at a 52 week low. While default rates are still below long term averages there could be trouble ahead:
SPDR Barclays High Yield Bond ETF (JNK)

3) Diverging Transports:

Collapsing oil should logically help the transports but this has not been the case and transports have significantly diverged from the S and P 500 with no new highs in the transports in over a year:

4) Volatility on the Up:

The Vix has also positively diverged not making new lows in each of the markets recent up moves in over a year and a half:

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.