You wouldn’t know it from the gut-wrenching fourth-quarter decline and 2019’s stock market snapback, but the euro has been downright sleepy. What does it mean for advisors? Be careful.
The U.S. dollar is one of the most hotly debated questions right now. It’s a macroeconomic factor that impacts returns of many asset classes, from emerging markets to U.S. large-cap multinationals. Inspired by recent research on a stronger dollar from economist Danielle Di Martino Booth, Jeremy Schwartz makes the case for currency hedging in international portfolios.
Currencies rarely move in a single direction for an extended period, especially in today’s world. WisdomTree is a strong believer that hedging helps neutralize currency movements and should be used strategically in portfolio allocations.
Although many investors remain focused on the potential impact of U.S. tax reform on corporate earnings, we believe any change in tax policy can have an equally important effect on the price and supply of corporate credit.
During a period of robust inflows and more positive sentiment, emerging markets (EM) have outperformed developed markets by a margin of 6% to 12% year-to-date. This is primarily a function of a rebound in earnings, higher asset prices and a rise in the value of EM currencies against the U.S. dollar. With many emerging equity markets up over 20% year-to-date, the logical question many investors are asking is, “Have I missed the rally?”
Jeremy J Siegel
Senior Investment Strategy Advisor
Jonathan Steinberg
CEO of WisdomTree
Jesper Koll
WisdomTree's Head of Japan
Jeremy Schwartz, CFA
Executive Vice President, Global Head of Research
Christopher Gannatti, CFA
Head of Research, Europe
Christopher Gannatti began at WisdomTree as a Research Analyst in December 2010, working directly with Jeremy Schwartz, CFA®, Director of Research. In January of 2014, he was promoted to Associate Director of Research where he was responsible to lead different groups of analysts and strategists within the broader Research team at WisdomTree. In February of 2018, Christopher was promoted to Head of Research, Europe, where he will be based out of WisdomTree’s London office and will be responsible for the full WisdomTree research effort within the European market, as well as supporting the UCITs platform globally. Christopher came to WisdomTree from Lord Abbett, where he worked for four and a half years as a Regional Consultant. He received his MBA in Quantitative Finance, Accounting, and Economics from NYU’s Stern School of Business in 2010, and he received his bachelor’s degree from Colgate University in Economics in 2006. Christopher is a holder of the Chartered Financial Analyst designation.
Kevin Flanagan
Senior Fixed Income Strategist
Bradley Krom
Associate Director of Research
Tripp Zimmerman, CFA
Associate Director of Research
Rick Harper
Head of Fixed Income & Currency
Gaurav Sinha
Asset Allocation Strategist
Anita Rausch
Head of Capital Markets
Michael Barrer
Associate Director of Capital Markets
David Abner
Head of Europe
Joseph Tenaglia, CFA
Asset Allocation Strategist
Jeff Weniger, CFA
Asset Allocation Strategist
Matt Wagner
Research Analyst
Alejandro Saltiel, CFA
Quantitative Research Analyst
Alejandro Saltiel joined WisdomTree as a Quantitative Research Analyst in May 2017. He is responsible for quantitative research on WisdomTree’s products and global equity markets. Prior to joining WisdomTree, Alejandro worked at HSBC Asset Management’s Mexico City office as Portfolio Manager for multi-asset mutual funds. He started his career working at a boutique hedge fund that specialized on trading options on sector-levered ETFs. Alejandro received his Master’s in Financial Engineering degree from Columbia University in 2017 and a Bachelor’s in Engineering degree from the Instituto Tecnológico Autónomo de México (ITAM) in 2010. He is a holder of the Chartered Financial Analyst designation.
Brendan Loftus
Research Analyst
Kara Marciscano, CFA
Research Analyst
With other major central banks easing and the Fed looking to hike rates, the U.S. dollar strengthened broadly. In fact, the Bloomberg Dollar Spot Index (BBDXY) recently powered through the previous cycle highs of March 2015. With the trend in dollar appreciation potentially resuming, where are markets likely to head next?
One of the most important themes impacting the global markets has been the strengthening U.S. dollar, a trend that WisdomTree expects to continue for some time. One consequence in terms of investor positioning has been a surge in flows and interest in currency-hedged international investment strategies. But this also has put pressure on the U.S. economy, revenue of American companies as well as corporate profits.
Over the last six weeks, financial markets have continued to grapple with the current and future implications of the one-day devaluation of the Chinese yuan. While we and other market participants failed to see this move coming, we believe it is important to put this shift in policy in context and attempt to understand what Chinese officials are ultimately aiming to achieve.
When making investment decisions, many are familiar with making allocation decisions between large and small caps or between growth and value stocks. Recently, as a result of the divergence in central bank policies, investors have also had to take views on international currency risk, with clear winners and losers. But what about the currency impact on domestic equities?
The devaluation of the Chinese yuan is unlikely to mark the start of competitive currency devaluations coming to Asia. Yes, the move was clearly forced by real economic forces, but I do not believe, this is the start of an imminent series of future devaluations from China.