RESEARCH: MACRO & ECONOMICS

EM DEBT: TO HOLD, OR NOT TO HOLD?

Hard currency emerging market debt outperformed local currency EM debt since 2013
EM government and corporate debt traded comparably
Adding EM debt to a traditional US equity-bond portfolio would have generated only marginal benefits

GLOBAL PENSION FUNDS: THE COMING STORM

The outlook for US equity and bond returns is low based on historical data
The return assumptions of US public pension funds are difficult to achieve
Only an extreme allocation to alternatives would meet the expected rate of return

PMI & EQUITY FACTOR PERFORMANCE

Value and Size have a positive relationship with the PMI, similar to the S&P 500
Indicates that risk sentiment is a core driver of factor performance
Investors can consider incorporating variables like the PMI in a risk management framework

EQUITY FACTORS & THE MIGHTY US DOLLAR

The US dollar had a slightly negative relationship with the stock market since 1996
Some equity factors are more sensitive to changes in the US dollar than others
On average the sensitivity is zero, but as often averages are misleading

CORPORATE DEBT IN THE CHINESE STOCK MARKET

China exhibits the world’s highest corporate debt as % of GDP
However, Chinese stocks are not significantly more levered than U.S. stocks
Asset and debt growth has stalled in 2018, likely indicating an economic slowdown

EQUITY FACTORS & INFLATION

EQUITY FACTORS & GDP GROWTH

Economic cycles have a clear impact on factor performance
Some factors show pro-cyclical while others highlight anti-cyclical characteristics
Given that real GDP is not published in real-time, it is unlikely effective for factor selection

FACTORS & INTEREST RATES

There are no consistent relationships between Value, Size, Momentum and interest rates
Applies to high and low and increasing and decreasing rate environments
Investors shouldn’t be too concerned about factor exposure and rising rates, more about very low rates

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