📑 Research Notes for 2023-04-10
This week, we look at Finland's acceptance into NATO, BOJ's new governor, what bond yields are telling us about the economy, and tailwinds for gold.
We conduct extensive investment research and share the most interesting content that we come across every week. Here is a curated list of this week’s top observations.
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Last Week’s Market Performance Heatmap
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Finland Joins NATO, Russia's Response Uncertain.
Finland has become the 31st member of NATO, abandoning its neutrality to join the world's biggest military alliance. President Anisto said that the era of non-military alliances had come to an end and a new era begins. However, he stressed that Finland's foreign policy will not change and the country will still pursue peace and stability. The move was prompted by Russia's invasion of Ukraine. The question now is how Russia will respond.
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Kazushige Ueda's BOJ Appointment Could Shake Global Financial Markets.
The appointment of economist Kazushige Ueda as the next governor of the Bank of Japan (BOJ) could lead to a shift in the central bank's monetary policy, which could have significant implications for global financial markets. Ueda is known for his skepticism of the BOJ's current policy of aggressive monetary easing, and if appointed, he may push for a more cautious approach. This could lead to a strengthening of the yen and a potential sell-off in Japanese stocks, as well as impacting global markets that have been influenced by the BOJ's policies.
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Bond Yields Could Go Lower Amid Softening US Economy.
Bond yields can go lower, according to Mark Matthews, Head of Research Asia at Julius Baer. The US economy is softening, and there is good reason for the Fed to pause and eventually start cutting in the second half of the year, which would mean yields go down. Matthews believes that inflation will come down, and the breakout in gold is indicative of people wanting to hedge against the dollar going down.
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Gold May Benefit from Falling Inflation and Interest Rates.
The dollar has been down for four out of the last five weeks, U.S. GDP numbers have been revised down, and rising consumer prices are slowing, all of which may continue to be a tailwind for gold. Gold was up over 8.5% in March, the best month since July 2020, and is up over 9.25% for the year. While gold is considered an inflation hedge, falling inflation data has yet to push gold significantly lower, partially because interest rates are also falling. Gold typically rallies when the Fed is cutting rates, which the market currently has priced in at a reasonably high probability starting this June.
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Curated by Joseph Lu, CFA®
Joseph is the founder and managing director of Conscious Capital Advisors, and a CFA® Charterholder.
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