A just-published report updated our view on both the short-term potential for a reprieve in beleaguered global financial markets, and the still worrisome cyclical picture characterized as historically high and (likely) sticky inflation in the developed world.
One strategic position, where we have recently increased our exposure to, reflects being long a structurally attractive asset market and currency against one of the global “weak links”. The euro area has positive longer-term fundamentals and material room for improving cyclical prospects given how depressed sentiment has become as the energy crisis worsened this summer. Conversely, Canada has bleak longer-term fundamentals and a deteriorating cyclical outlook.
Consequently, our absolute return investment strategy has a short on the CAD/EUR cross rate, and is short Canadian financials versus their euro area counterparts in the MRB TradeBook.