Research – Page 19 – Harlyn Research LLP

Our flagship product, called Synopsis, is published every two weeks. It uses the data generated by our process to address whatever we think are the most important issues in global investing at the time.

Harlyn Synopsis Sample

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All our notes are tagged thematically, so feel free to click on any of the topics and explore what we have written.

Under UK regulations, our research is only available to professional clients and eligible counterparties; they are not available to retail (investment) clients. Harlyn Research is not registered as an investment advisor with the SEC and therefore any information about our investment products or services is not directed at nor intended for US investors.

Fear Volatility not Bond Yields

Wednesday, February 7th, 2018

This is what drives asset allocation

The Great Volatility Slide is Over and it is time to compare the relative impact of rising bond yield vs rising volatility on asset allocation. We conclude that consensus earnings estimates for 2018 provide a substantial margin of safety against the threat of rising bond yields and rising volatility. The margin of safety declines in 2019, but the big threat comes from volatility, not bond yields. On current forecasts, we would need to return to an ultra-low volatility regime in order to maintain an overweight in equities into 2020.

Filed under: Categories: Earnings Estimates, Harlyn's Process, Volatility, Yield curve

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A Selection of Emerging Markets

Wednesday, January 31st, 2018

These may help to mitigate dollar volatility

Despite our worries in late November, EM Equities have done well, but we still need to be selective. In Asia, we like China, Thailand and Singapore and have put Malaysia and Indonesia on the positive watch-list. We don’t like Latin America at all, and prefer Austria as the play on Eastern Europe. This leaves South Africa and India, two BRICS, which have interesting upside, if the politics turn out right.

Filed under: Categories: China, Emerging Markets, Geo-Political Risk, Global Equities

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If You Have to Own Bonds…

Wednesday, January 24th, 2018

This is how to trade them

All our tactical asset allocation models are close to maximum underweight in fixed income. If you have to have some exposure, our models are clear that the best overall strategy is momentum with a bias towards risk-aversion. Other strategies tend to lead to lower returns and larger drawdowns over the long term.

Filed under: Categories: Corporate Bonds, Government Bonds, Momentum vs mean reversion

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China Out of Sync

Wednesday, January 17th, 2018

What do they know that we don’t?

Our equity sector models suggest that Chinese investors are much more defensive and less pro-cyclical than investors in every other region. This is odd considering that China is forecast to be the largest single contributor to global growth. The obvious, but not the only possible, explanation is that Chinese investors don’t share this optimism.

Filed under: Categories: China, Defensives, Risk aversion

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The Great Volatility Slide is Over

Thursday, January 11th, 2018

It’s still very low, but it will start rising soon

We think our volatility index has stopped falling, though we can’t certain just yet. Once this has happened, it will probably take 10-11 months for it to return to its median level, based on past experience. All other things being equal, median volatility will require most investors to have a benchmark weight in equities, as opposed to their current overweight.

Filed under: Categories: Global Equities, Government Bonds, Risk-Adjusted Returns, Volatility

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Final Thoughts & First Decisions

Wednesday, December 13th, 2017

The agenda for January starts to take shape

It’s too late to make any significant adjustments to the portfolio this year, but there are several themes which may have matured sufficiently to be immediately actionable when markets restart in January. On the downside, we may have to cut exposure to China and to the Technology sector in the US, and globally. On the upside, there may be an opportunity in UK equities and certain defensive sectors like Staples and Telecom.

Filed under: Categories: China, Defensives, Technology, United Kingdom

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Do They Know It’s Christmas

Wednesday, December 6th, 2017

Chinese and US equity seasonality are different

We remain concerned about the bubble in the Chinese Technology sector leading to a global equity correction. This week we examine the seasonality of Chinese equity returns to see if we can get any clues on timing. We find that the recent sell-off is in line with normal seasonal patterns and that the moment of greatest risk appears to be mid-February to early April or early June to mid-July, assuming a sell-off starts in China, not elsewhere.

Filed under: Categories: China, Equities, Seasonality, United States

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The Anti-Forecast

Wednesday, November 29th, 2017

Current conditions trump medium-term outlooks

Investors don’t need to read the outlooks for 2018 to know that they are not being adequately rewarded for holding supposedly safe assets like US Treasuries. They are effectively forced into US and international equities, because the returns generated by traditional fixed income or alternative assets are unattractive in risk-adjusted terms.

Filed under: Categories: Government Bonds, Risk-Adjusted Returns, Seasonality

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What next for EM?

Thursday, November 23rd, 2017

Structural change and a general underweight

Three key messages for EM equities. (1) We expect to be underweight by early Q1 2018. We are already underweight EM in fixed income. (2) EM equities are not behaving like a single asset class at present. Only specialists should attempt to pick favourite countries. (3) The inclusion of China A shares in the main EM indices will force investors to rethink the way they allocate money, and they will be underweight while they work out what to do.

Filed under: Categories: China, Emerging Markets, Equities, Government Bonds

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