Latest news with #QuantumStrategy
West Australian
3 hours ago
- Business
- West Australian
Markets are shrugging off the Israel-Iran conflict. Some strategists warn of complacency
Global investors may be underpricing the impact of a conflict between Israel and Iran, market watchers warned overnight Monday, as stocks rallied despite escalating warfare in the Middle East. The two regional powers continued trading fire on Monday, marking the fourth consecutive day of fighting since Israel launched airstrikes against Iran last week. Despite the continued fighting — with hundreds reported dead — global stock markets sustained a positive momentum on Monday, seemingly shrugging off broader concerns about the conflict. Russ Mould, investment director at AJ Bell, warned on Monday that there was a risk markets were underpricing 'the risk of a major conflagration in the Middle East', particularly when it comes to the energy market. European shares opened broadly higher on Monday, with Asia-Pacific stocks and US stock futures also trading in the green. Even Middle Eastern indexes saw gains on Monday, with the Tel Aviv 35 index last seen trading one per cent higher after falling 1.5 per cent last week. 'This is partly because there are so many moving parts and geopolitical considerations, and partly because the potential outcomes are so unthinkable,' Mould said. 'In a worst case, oil and share prices would be the least of our worries.' In a Monday morning note, David Roche, a strategist at Quantum Strategy, warned that the conflict between Israel and Iran 'will last longer than the Israeli lightning-strikes that the market is used to'. Torbjorn Soltvedtp, principal Middle East analyst at Verisk Maplecroft, agreed, saying an escalation remained of 'huge concern'. 'What we have now is very different, and what we're seeing is effectively a war and an open-ended one,' he said. 'And of course, that is something that has huge implications, not just for the region, but also for energy markets and how they interpret what is happening. You know, minute by minute and day by day.' Energy markets have moved the most on news of the attacks, as the Israel-Iran conflict stoked supply concerns. While Friday marked the biggest single-day gain for crude since Russia's full-scale invasion of Ukraine in 2022, however, global benchmark Brent crude futures — last seen at $US73.75 a barrel — were still far below the prices seen in the aftermath of Moscow's incursion into Ukrainian territory. 'A lull is the most likely outcome before later escalation when Iran rejects US Trump's overtures,' Roche said. 'The market is likely to mistake the lull for lasting peace. I would use the lull to buy into energy assets as a safe haven.' Some market watchers are taking a somewhat less pessimistic view, however. In a note on Monday, Deutsche Bank's Jim Reid noted that while both Iran and Israel had traded retaliatory blows, they had so far avoided 'the most extreme escalatory steps'. 'As geopolitical shocks are becoming more frequent it seems it's now at least a yearly occurrence that we refer to our equity strategists' work on the impact of such shocks and how long it takes for the market to recover from them,' he said. 'The typical pattern is for the S&P 500 to pull back about -6 per cent in three weeks after the shock but then rally all the way back in another 3,' Reid said. '[Our strategists] believe this incident will likely be milder than this unless we get notable escalation as they highlight that equity positioning is already underweight … and a -6 per cent selloff would need it to fall all the way to the bottom of its usual range.' Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, saidon Monday that he feels the market is correct in not pricing a huge escalation, such as the US being drawn into the fray, or a blockade of the Strait of Hormuz. The Strait of Hormuz, nestled between Iran and Oman, is a vital oil transit route through which millions of barrels of oil are transported every day. 'Still, the market reaction has been very modest, so there is room for disappointment if things were to escalate,' Gijsels conceded on Monday. CNBC
CNBC
12 hours ago
- Business
- CNBC
Markets are shrugging off the Israel-Iran conflict. Some strategists warn of complacency
Global investors may be underpricing the impact of a conflict between Israel and Iran, market watchers warned on Monday, as stocks rallied despite escalating warfare in the Middle East. The two regional powers continued trading fire on Monday, marking the fourth consecutive day of fighting since Israel launched airstrikes against Iran last week. Despite the continued fighting — with hundreds reported dead — global stock markets sustained a positive momentum on Monday, seemingly shrugging off broader concerns about the conflict. Russ Mould, investment director at AJ Bell, warned on Monday that there was a risk markets were underpricing "the risk of a major conflagration in the Middle East," particularly when it comes to the energy market. European shares opened broadly higher on Monday, with Asia-Pacific stocks and U.S. stock futures also trading in the green. Even Middle Eastern indexes saw gains on Monday, with the Tel Aviv 35 index last seen trading 1% higher after falling 1.5% last week. "This is partly because there are so many moving parts and geopolitical considerations, and partly because the potential outcomes are so unthinkable," Mould said. "In a worst case, oil and share prices would be the least of our worries." In a Monday morning note, David Roche, a strategist at Quantum Strategy, warned that the conflict between Israel and Iran "will last longer than the Israeli lightning-strikes that the market is used to." Torbjorn Soltvedtp, principal Middle East analyst at Verisk Maplecroft, agreed, saying an escalation remained of "huge concern." "What we have now is very different, and what we're seeing is effectively a war and an open-ended one," he told CNBC's "Squawk Box Europe." "And of course, that is something that has huge implications, not just for the region, but also for energy markets and how they interpret what is happening. You know, minute by minute and day by day." Energy markets have moved the most on news of the attacks, as the Israel-Iran conflict stoked supply Friday marked the biggest single-day gain for crude since Russia's full-scale invasion of Ukraine in 2022, however, global benchmark Brent crude futures — last seen at $73.75 a barrel — were still far below the prices seen in the aftermath of Moscow's incursion into Ukrainian territory. "A lull is the most likely outcome before later escalation when Iran rejects US Trump's overtures," Roche said. "The market is likely to mistake the lull for lasting peace. I would use the lull to buy into energy assets as a safe haven." Some market watchers are taking a somewhat less pessimistic view, however. In a note on Monday, Deutsche Bank's Jim Reid noted that while both Iran and Israel had traded retaliatory blows, they had so far avoided "the most extreme escalatory steps." "As geopolitical shocks are becoming more frequent it seems it's now at least a yearly occurrence that we refer to our equity strategists' work on the impact of such shocks and how long it takes for the market to recover from them," he said."The typical pattern is for the S&P 500 to pull back about -6% in 3 weeks after the shock but then rally all the way back in another 3," Reid said. "[Our strategists] believe this incident will likely be milder than this unless we get notable escalation as they highlight that equity positioning is already underweight … and a -6% selloff would need it to fall all the way to the bottom of its usual range." Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, told CNBC on Monday that he feels the market is correct in not pricing a huge escalation, such as the U.S. being drawn into the fray, or a blockade of the Strait of Hormuz. The Strait of Hormuz, nestled between Iran and Oman, is a vital oil transit route through which millions of barrels of oil are transported every day. "Still, the market reaction has been very modest, so there is room for disappointment if things were to escalate," Gijsels conceded on Monday.
Yahoo
29-05-2025
- Business
- Yahoo
ETFs in Focus Amid Japan's Soaring Bond Yields
Japan's bond market is causing ripples across global financial markets, with rising long-dated government bond yields threatening to trigger capital flight from the United States and unwind the popular carry trade strategy. The carry trade is a strategy where investors borrow in low-yielding currencies like the yen to invest in higher-yielding assets abroad. Yields on Japan's 40-year government bonds rose on May 28, 2025, with demand at recent auctions reported to be the weakest since November, according to Reuters, quoted on CNBC. These bonds hit a record high of 3.689% last Thursday and were last trading at 3.318% — marking an increase of nearly 70 basis points so far in 2025. Meanwhile, 30-year bond yields have surged more than 60 basis points this year to 2.914%, while 20-year yields have climbed over 50 basis points. These levels bring long-dated yields dangerously close to all-time highs. The steepening of Japan's yield curve is driven by a fundamental change in investor behavior. Japanese life insurers — traditionally large buyers of 30- and 40-year bonds due to regulatory needs — have largely fulfilled their purchasing obligations. This has led to a falloff in demand, per the CNBC article. Compounding the issue, the Bank of Japan has been scaling back bond purchases as part of its broader monetary policy pivot, leaving a demand gap that private investors have not filled. This supply-demand imbalance is expected to continue putting upward pressure on yields. Such moves can add to the strength of Invesco CurrencyShares Japanese Yen Trust FXY. The rising yields on Japanese government bonds (JGBs) could prompt Japanese investors to repatriate capital from overseas, particularly from the United States. Albert Edwards, global strategist at Societe Generale, warned on CNBC that if the trend continues, it could lead to a 'global financial market Armageddon.' David Roche of Quantum Strategy cautioned that tightening global liquidity, paired with rising long-term rates, could slash global growth to just 1% and prolong the bear market across multiple asset classes, as quoted on CNBC. A strengthening yen, driven by higher domestic yields, would further reduce the incentive for Japanese investors to hold foreign assets — especially in U.S. tech stocks, which have seen significant Japanese investment. The tech-heavy ETF Invesco QQQ Trust QQQ may come under pressure due to this situation. David Roche of Quantum Strategy highlighted Japan's status as the world's second-largest creditor, with net external assets reaching a record ¥533.05 trillion ($3.7 trillion) in 2024. This adds a layer of vulnerability to global markets. He also noted that this potential capital shift reflects a broader 'end of U.S. exceptionalism,' with similar patterns emerging in Europe and China. A strengthening yen could be a headwind for Japan's export-heavy companies, but it may benefit domestically focused Japanese stocks. iShares MSCI Japan Small Cap ETF SCJ and WisdomTree Japan SmallCap Dividend Fund DFJ should benefit out of this situation. Top of Form Increased domestic investment demand could support large-cap Japan equity ETFs like iShares MSCI Japan ETF EWJ, particularly if funds shift away from foreign markets. But then, Japan's indexes are export-oriented. If the yen strengthens meaningfully, Japan's export-oriented companies may take a hit. If Japanese investors offload U.S. Treasuries or bond ETFs (like TLT) to repatriate funds, prices could drop and yields rise. Long-duration bond ETFs will be hit hardest due to their sensitivity to interest rate changes. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report iShares 20+ Year Treasury Bond ETF (TLT): ETF Research Reports Invesco QQQ (QQQ): ETF Research Reports Invesco CurrencyShares Japanese Yen Trust (FXY): ETF Research Reports iShares MSCI Japan ETF (EWJ): ETF Research Reports WisdomTree Japan SmallCap Dividend ETF (DFJ): ETF Research Reports iShares MSCI Japan Small-Cap ETF (SCJ): ETF Research Reports This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Why one market vet sees more big pain coming for the dollar — and a recession by year-end
Trump's trade war will keep driving tumult in markets and the economy, according to David Roche. The Wall Street vet thinks tariffs could drive a significant decline in the dollar's value in the coming years. Meanwhile, he told BI that the economy could tip into a recession by the end of 2025 as investors pivot from the US. Investors may be a bit calmer as optimism grows around trade deals, but markets should brace for further pain, according to one longtime strategist. David Roche, a former Morgan Stanley banker and the head of Quantum Strategy, thinks the value of the US dollar could plummet around 15%-20% over the next five to 10 years — and that a more immediate recession could hit the US economy by the end of 2025. Roche's main concern is that Trump's trade war is damaging America's reputation in global financial markets and causing investors to shift away from US assets. "I think the tariffs do damage to the reputation of the United States, the concept of exceptionalism where everybody puts their money in the US," he told Business Insider. "So the underperformance relative to other economies means they take part of that money out again, which weighs on the dollar, and of course weighs on the performance of assets." The value of the greenback has tumbled since Trump embarked on his trade war. The US Dollar Index, which measures the dollar against a handful of other currencies, is down 8% since Trump returned to the White House. This embedded content is not available in your region. Roche believes the decline isn't close to being over because foreign investors have soured on the US and dollar-denominated assets. Goldman Sachs estimates that foreign investors sold around $63 billion worth of equities in the two months leading up to April 25. Roche suggested that the trend is likely to continue, adding that $63 billion was "nothing" considering that foreign investors own around 18% of the US stock market. US government bonds have also been hit by the trade war, with yields spiraling higher during the peak of the market volatility in early April. That's bad news for the value of the dollar, which declines as the demand for US assets weakens. Even after its drop year-to-date, Roche believes the US currency has further to fall, basing his estimates on the real effective exchange rate. That's a measure of the value of a currency against a basket of other currencies based on trade between the two nations. According to data from the Bank for International Settlements, the US real broad effective exchange rate hovered around 112 in March. That's around 20% higher than it was in 2008, the year Roche approximates that the dollar started to become overvalued. This embedded content is not available in your region. Other forecasters on Wall Street have made similar calls. Deutsche Bank said in a recent note that the US was in the midst of a "dollar bear market," pointing to a "reduced desire by the rest of the world to fund growing twin deficits in the US." Goldman Sachs' chief economist, Jan Hatzius, said in an op-ed in The Financial Times that he believes the dollar's decline has "considerably further to go." "Dollar depreciation reinforces our view that the 'incidence' of higher US tariffs will fall predominantly on American consumers, not foreign producers," Hatzius wrote. A broad shift away from the US could take five to 10 years, Roche said, as seismic change in global trade takes time. But he sees more immediate potential knock-on effects as the dollar weakens — mainly, a recession by the end of 2025. Weaker demand for US Treasurys could lead to problems for government funding. While Trump has promised tariffs will cause "massive amounts of money" to flow into the US, Roche says that's not likely because of how tariffs hinder trade. He said the overall impact of the trade war could crimp growth and cause a recession as soon as the end of the year or the start of 2026. "I would say there could be a crisis around the current budget when the market wakes up with the fact that the figures are not going to be funded by tariffs and the foreigners are not putting as much money into the US," he said. Concerns about a recession have been on the rise as traders assess the potential impact on global growth. A recent Bank of America survey showed 80% of global fund managers believe the biggest tail risk for markets is a global recession as a result of the trade war. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
08-05-2025
- Business
- Business Insider
Why one market vet sees more big pain coming for the dollar — and a recession by year-end
Investors may be a bit calmer as optimism grows around trade deals, but markets should brace for further pain, according to one longtime strategist. David Roche, a former Morgan Stanley banker and the head of Quantum Strategy, thinks the value of the US dollar could plummet around 15%-20% over the next five to 10 years — and that a more immediate recession could hit the US economy by the end of 2025. Roche's main concern is that Trump's trade war is damaging America's reputation in global financial markets and causing investors to shift away from US assets. "I think the tariffs do damage to the reputation of the United States, the concept of exceptionalism where everybody puts their money in the US," he told Business Insider. "So the underperformance relative to other economies means they take part of that money out again, which weighs on the dollar, and of course weighs on the performance of assets." More dollar weakness ahead The value of the greenback has tumbled since Trump embarked on his trade war. The US Dollar Index, which measures the dollar against a handful of other currencies, is down 8% since Trump returned to the White House. Roche believes the decline isn't close to being over because foreign investors have soured on the US and dollar-denominated assets. Goldman Sachs estimates that foreign investors sold around $63 billion worth of equities in the two months leading up to April 25. Roche suggested that the trend is likely to continue, adding that $63 billion was "nothing" considering that foreign investors own around 18% of the US stock market. US government bonds have also been hit by the trade war, with yields spiraling higher during the peak of the market volatility in early April. That's bad news for the value of the dollar, which declines as the demand for US assets weakens. Even after its drop year-to-date, Roche believes the US currency has further to fall, basing his estimates on the real effective exchange rate. That's a measure of the value of a currency against a basket of other currencies based on trade between the two nations. According to data from the Bank for International Settlements, the US real broad effective exchange rate hovered around 112 in March. That's around 20% higher than it was in 2008, the year Roche approximates that the dollar started to become overvalued. Other forecasters on Wall Street have made similar calls. Deutsche Bank said in a recent note that the US was in the midst of a "dollar bear market," pointing to a "reduced desire by the rest of the world to fund growing twin deficits in the US." Goldman Sachs' chief economist, Jan Hatzius, said in an op-ed in The Financial Times that he believes the dollar's decline has "considerably further to go." "Dollar depreciation reinforces our view that the 'incidence' of higher US tariffs will fall predominantly on American consumers, not foreign producers," Hatzius wrote. Knock-on effects A broad shift away from the US could take five to 10 years, Roche said, as seismic change in global trade takes time. But he sees more immediate potential knock-on effects as the dollar weakens — mainly, a recession by the end of 2025. Weaker demand for US Treasurys could lead to problems for government funding. While Trump has promised tariffs will cause "massive amounts of money" to flow into the US, Roche says that's not likely because of how tariffs hinder trade. He said the overall impact of the trade war could crimp growth and cause a recession as soon as the end of the year or the start of 2026. "I would say there could be a crisis around the current budget when the market wakes up with the fact that the figures are not going to be funded by tariffs and the foreigners are not putting as much money into the US," he said. Concerns about a recession have been on the rise as traders assess the potential impact on global growth. A recent Bank of America survey showed 80% of global fund managers believe the biggest tail risk for markets is a global recession as a result of the trade war.
