Expressing the Fed's Leadership through its Statement

The Federal Reserve's two-day meeting concludes today.  There is little doubt that it will stand pat.  There is not press conference afterward, so the statement is the only thing investors will get.  The statement is important.  We argue that the FOMC statement is the clearest expression of the views of the Fed's leadership.  The minutes are more comprehensive they dilute the signal from the Fed's leadership, and it conflates the difference between voters and non-voters and between the Governors and regional Presidents. 

Hillary Clinton, the TPP, and the Environment

Hillary Clinton and many of her fellow Democrats meeting in Philadelphia hope to show the party unity arguably lacking when the Republicans gathered in Cleveland.  A sticking point to a unified Democratic Party, however, has been the Trans-Pacific Partnership (TPP), one of the most contentious topics of debate between supporters of Clinton and erstwhile rival Bernie Sanders.

How did the Yen Become So Attractive?

The strength of the Japanese yen is the main development in the foreign exchange market today.  It has gained nearly 1.5%, as short-term participants grow skeptical of the kind of stimulus that had driven the yen around 7.5% lower between July 8 and July 21's six-week high.  The pendulum of market sentiment has swung wildly.

China Unhappy over the PCA South China Sea Ruling

China’s reaction to the Permanent Court of Arbitration’s relatively harsh ruling against it on the South China Sea has been angry. The court upheld nearly all of the 15 points on which the Philippines approached the Court in 2013. China boycotted the proceedings, questioning the Court’s jurisdiction and publicly claiming historic rights to the South China Sea and its resources. The Court rejected this claim, concluding ‘there was no legal basis for China to claim historical rights to resources’.

Cause and Effect, and then there is Monetary Policy

Contrary to conventional wisdom, we think monetary policy remains an important variable for asset prices. Interest rates and foreign exchange are two dimensions of the price of money.  There is a relationship, even if it is not linear or temporally consistent.

Is there Additional Upside for the Dollar and S&P?

The US dollar gained against all the major currencies over the past week.  It also rose against many emerging market currencies.  A notable exception was the Chinese yuan.  The yuan rose before the weekend, extended its advancing streak to four consecutive sessions, and in so doing, it snapped a six-week slide.

For Africa, South Korea Sets a Knowledge-Economy Example

Twenty-first century competition is centered on the knowledge economy, with Europe and North America inexorably charting the course of development in the international arena. In calculated steps, Latin America and Asia have been asserting the need for enhanced knowledge economy strategies in their own pursuits of national and regional development. The historic pattern formulated by Japan has set the course for the People’s Republic of China (PRC), Malaysia, and the newly industrialized economies of Asia.

The Brexit in a Flash (PMI)

As the week draws to a close, there are three main developments in the capital markets.  First, the profit taking seen in US equities yesterday has continued in Asia and Europe today.  The MSCI Asia Pacific Index and the Dow Jones Stoxx 600 in Europe are both off around 0.5%.