“History doesn’t repeat itself, but it often rhymes,” as Mark Twain is often quoted as saying. When it comes to the credit cycle and the stock market, the ups and downs most definitely rhyme. The challenge for investors is to be in equities in the upswing of the cycle, selling out before the downswing starts due to rising default rates. The Swedish economist Knut Wicksell argued that when the return on capital was higher than the cost of capital, it would lead to a cumulative process of excess credit creation due to higher expectations of profits. This might come about

2018 was a great year — 2019 should be even better. How did Fathom do in terms of predictions for 2018? Here is a summary of our best and worst calls. Fathom’s best calls of 2018 In the first quarter, we called for heightened volatility in equity markets — a call that came through in spades. Equity volatility will remain high through 2019 too. Refresh the chart in your browser | Edit chart in Datastream We correctly predicted four fed hikes throughout 2018, a strongly out-of-consensus call. We expect two or three further hikes during 2019 — which is strongly out-of-consensus again,

*This article originally  published prior to the March Ist  announcement on tariffs by US President Trump One of the numerous criticisms directed towards President Trump is that he tends to view everything as a zero-sum game. Almost certainly informed by his years as a corporate deal-maker, every gain made comes at someone else’s expense. Such thinking seems to be behind the administration’s recent greenlighting of tariffs on US steel and aluminium imports. The recently issued reports[1] by Commerce Secretary Ross cited “national security concerns” for supporting the imposition of tariffs. However, Trump’s comments that he expects the measures to “create a lot

Given the way short-term US interest rate futures are priced[1], investors seem pretty unanimous in their view that the soon-to-be-ex-Fed Chair Yellen will, for a third successive year, celebrate the festive season by continuing to slide the punchbowl away from the party ie. hike the target Funds rate by 25bp. The rationale for a December hike was clearly outlined in the recently published FOMC minutes, namely the US economic growth trajectory remains solid, and as a result of the tightness of the labour market, which is viewed as “operating at or above full employment”, the undershoot of inflation relative to

The so-called ‘Trump trade’ may have shown a flicker of life following the passing of a 2018 budget blueprint last Thursday, but we do not expect US tax reform to be enacted until Q1 or Q2 next year. Refresh the chart in your browser | Edit chart in Datastream Want more charts and analysis? Access a pre-built library of charts built by FathomConsulting via Datastream Chartbook in Thomson Reuters Eikon. Last Thursday, Republican senators passed a 2018 budget blueprint by a narrow 51 – 49 margin, with Democrats unanimously opposed. Thursday’s vote is one significant hurdle cleared for the administration’s recent tax proposal; the US dollar, Treasury

The bond market reacted to Donald Trump’s election win: ten-year treasury yields rose from 1.86% on Nov. 8, Election Day, to 2.37% on Nov. 25.