Wednesday, October 9, 2013

The Song Remains the Same

Every market has edges - its angles of asymmetry. Lately, we've found participants reaction to the US dollar disproportionately skewed with upside bias during these sharp retracment rallies, rather than recognizing the fact that it had declined roughly 6% since July and from a structural perspective broke down in September. 

Our expectations continue to be that the dollar will take another trip lower through the bottom of its long-term range, which will create a tailwind behind both emerging markets, precious metals and inflation expectations downstream. 


Although our catalysts for a more material correction in the equity markets galvanized earlier in the week, the old performance tell-tales of stabilizing and reaccelerating growth outside the US are evident. For instance, in a typical risk-off environment you would never see either emerging markets or the Aussie outperforming. Both have - and our expectations remain consistent with our earlier views this summer.