ALL THINGS BIG AND SMALL 2.0

  Folk music icon Bob Dylan’s song “The times they are a-changin” has never been more true. We are living in a period of unprecedented geopolitical and economic upheaval-the final consequences of which we are not yet able to discern. Uncertainty is the silent killer of financial markets. But while Uncertainty by itself is bad for the financial markets, the events that unfold during the period of uncertainty can be either good or bad. More US tariffs? Bad. Fed rate cuts? Good. Powell’s term ends in May 2026 and new Trump-appointed Fed Chair leads to even more rate cuts in 2026? Good in the short-term. This leads to heightened inflation and asset bubbles in the long-term? Ultimately bad.   So, today we design a portfolio in which the main objective is to be low risk and yet yield a return that is above the rate of inflation. And we will do an analysis and 1-year ahead forecast for the Portfolio, and use the SPY ETF as a reference benchmark.   We   are not att...

  The image above plots the Global Economic Policy Index from 1997 to Mar 2025. The Index is compiled by https://www.policyuncertainty.com/about.html an econmic research institute. Its methodology can be obtained from its website.  We can clearly see that the ups and downs are getting increasingly extreme. You can see it when you compare the height of the peaks registered during the 1997 Asian Financial Crisis, the 2008 US Sub-Prime Mortage Melt-Down, the 2020 Covid-19 Pandemic, and the recent MAGA Madness.  The reason for greater and greater bouts of Uncertainty volatily is that as countries of the word become more and more interconnected through technology and trade, the world economy becomes a SuperOrganism with a life of its own- a.ka. A Complex Adaptive System (CAS). The properties of a CAS are feedback loops, adaptation and co-evolution, emergent behaviour, decentralization and distributed control etc. The full list of properties is given below.  Another r...

  Introduction More important than the daily ups and downds of the Dow Jones, the S&P500 and the Nasdaq Composite is the big picture insights that can be gleaned from other asset classes such as the US Treasuries (Bonds) yield, the US Dollar, and the spot price Gold. Refer to the charts above. US Treasuries Yields (data from FRED the Federal Resserve Bank of Saint Louis) Theoretically Bond prices rise in an deflationary economic environment (i.e. their yields in % fall). Bond yields determine interest rates in an economy. So because demand for loans is low in slow economic growth conditions, interest rates charged by lenders e.g. banks fall, which means bond prices rise. This is because when interest rates fall, existing bonds with higher coupon rates (fixed interest payments) become more attractive to investors than newly issued bonds offering lower interest rates. This increased demand for the existing, higher-yielding bonds drives their prices up.  But our chart above s...

  THE UNCERTAINTY INDEX: SINGAPORE HAS THE HIGHEST LEVEL Uncertainty is the silent and most deadly  killer of the financial markets. And Singapore, as one of the most open economies in the world with a trade-to-GDP ratio of 311% as of 2023 will be badly impacted. https://www.policyuncertainty.com/ have done great work in creating Indices to measure uncertainty. Basically it uses text analysis keywords in the news media, in Internet searches as well as economic data and data on policy changes to compile the Uncertainty Index. They have also compiled Uncertainty Index for major countries as well as a global Index. Read the About Us and Methodology on their website for a better understanding . The chart shows global uncertainty at an all-time high due to Donald Trump's unpredictability and insane negotiation antics because he thinks ruling a country is similar to "The Art of the Deal" the title of his book. The previous peak on the chart was the Covid-19 crisis beginning...