When it comes to portfolio and performance analysis it is essential that investors understand the key performance metrics. Two important measures which are often used in fund or portfolio analysis are alpha and beta. Both measures are derived from the Capital Asset Pricing Model (CAPM), which was introduced in the early- to mid-1960s and are calculated based on the past performance of a portfolio. Despite these similarities, alpha and beta offer different insights into the risk and return characteristics of a portfolio.   Beta: A Measure of Market Risk (Systematic Risk) Beta measures a portfolios sensitivity to market movements, the

Our US Economic Sentiment Indicator (ESI) dropped from 6.1% in May to 4.9% in June. Some of this softening can be explained by trade disputes — both between the US and China (as demonstrated by our CEI and explained in last week’s video) and between the US and other trading partners.   Refresh the chart in your browser | Edit chart in Datastream Trade tensions aside, the decline in our ESI is not surprising, as businesses feel the effects of rising input costs, including higher oil prices, and a tightening labor market. The bigger picture though, is that at current levels our ESI suggests

Fathom’s measure of China’s economic activity, its CMI 2.0, continued its descent in May, slowing to a 15-month low of 6.2%. Refresh the chart in your browser | Edit chart in Datastream Below the official estimate of GDP growth, which was 6.7% in the second quarter, the widening wedge between Fathom’s measure and the official measure is increasingly reminiscent of the gap that emerged in late 2013 – 2015. Back then, just as they are now, the Chinese authorities used monetary stimulus to support short-term growth, repeatedly cutting banks’ reserve ratio requirements while denying that the economy was materially slowing. Refresh the

Blackstone is taking out an insurance policy of sorts in its takeover of Thomson Reuters’ financial-data division. The $20 billion buyout comes with features that enhance the Canadian seller’s upside if things go well, but leaves it with relatively more of the downside if they don’t. Steve Schwarzman’s investment firm is injecting $3 billion of equity alongside some co-investors to buy a 55 percent share of the Financial and Risk unit (F&R), now known as Refinitiv. Thomson Reuters, the parent company of Reuters, which includes Reuters Breakingviews, will keep a $2.5 billion stake. Blackstone also puts in $1 billion through

On average, since its inception, the euro area has experienced weaker consumer price inflation than the UK. Interestingly, the inflation differential has widened since the Global Financial Crisis, with the gap averaging almost one percentage point since 2008. Refresh the chart in your browser | Edit chart in Datastream With the inflationary impact of the post-Brexit sterling depreciation beginning to ebb, and with rising energy prices accounting for a larger proportion of the euro area’s CPI basket than the UK’s, that inflation differential has narrowed more recently. Fathom’s Inflation Trends (FIT) model points to a further narrowing this year, as UK inflation

After a prolonged period of tapering, the ECB finally appears ready to draw the curtains on its quantitative easing programme. At last month’s policy meeting, the ECB announced its intention to halve the pace of net asset purchases to €15bn per month after September and to conclude net purchases altogether by the end of the year. Despite the drawn-out tapering process, which by completion will have spanned almost two years, the ECB’s asset purchase programme has not been in operation for as long as those in other advanced economies, only beginning in earnest in March 2015. Refresh the chart in

Dealmakers set little store by trust. That’s why M&A lawyers are paid so much. It also explains why Comcast and Walt Disney are unlikely to declare a sensible truce in their bidding war for Twenty-First Century Fox. The cable group led by Brian Roberts and the Burbank-based giant both have their hearts set on the entertainment and international assets being sold by Rupert Murdoch’s Fox. As of Friday morning, Disney’s $71 billion deal was the highest offer for the Fox assets, which include a 39 stake in UK pay-TV group Sky. But Comcast has lodged a superior 26 billion pound offer for

The March Market Voice focused on three factors which explained the seemingly perverse EUR strength in the face of an increasing USD interest rate advantage: The EUR was historically cheap in real terms when it bottomed. Central bank – especially China – diversification away from the dollar may have been a source of strength. The relative value of equity markets may have been compelling enough to overwhelm the negative rate picture. We felt these three factors were generating substantial enough flows into EUR that defeated the negative interest rate environment. But in March when the article was published, it appeared

Sky shareholders seem disappointed by Twenty-First Century Fox’s 24.5 billion pound offer. They needn’t be. Rupert Murdoch’s latest bid is way more than the British pay-TV group is worth, and anyway just sets a new price floor for Sky. Fox on Wednesday hiked its offer for the 61 percent of Sky it doesn’t own to 14 pounds per share, compared with an original 10.75 pounds in December 2016 and rival Comcast’s 12.50 pounds. Those comparisons are skewed, since the earlier offers also came with further dividends. The final antitrust hurdle for Fox is getting thumbs-up from new Media Secretary Jeremy Wright for its

Fathom’s Sovereign Fragility Index (SFI) – an objective measure of fundamental sovereign credit risk across the world’s major economies – was updated for 2018 Q1 last Friday and is now available on Thomson Reuters Chartbook. Refresh the chart in your browser | Edit chart in Datastream Three countries saw their fragility increase from already high levels on the quarter: in order, these were Russia, Turkey and South Africa. That pattern of increasing fragility is reminiscent of the period of Fed tightening after 1994, when capital began to flow back into the US, triggering a wave of sovereign crises across emerging economies. Greece

Theresa May’s Brexit plan faces a battle on three fronts. The resignation of cabinet minister David Davis on Sunday night will embolden hardliners in her party who say the Prime Minister’s proposal to quit the European Union is too soft. But opposition parties still think it’s too hard, and Brussels is bound to want more concessions. With less than nine months to go until Britain leaves the bloc, it’s getting harder to envisage a compromise. May’s cabinet is split between those who are determined to sever ties with the EU, and those who want to limit the economic damage of

In recent years, several migratory trends have emerged. In Europe, the most notable development is the emergence of flows from southern and eastern countries to northern and western states. It is noticeable that the southern nations tended to be worse effected by the euro area crisis and that eastern nations tend, on average to have lower per capita incomes. Refresh the chart in your browser | Edit chart in Datastream But, how far can economics go towards explaining these trends? In an attempt to identify the factors driving intra-EU migration Fathom has developed its own model. According to the model, a country’s