The forces. Not the headlines.
Analysis and commentary on markets, companies, and the forces that move them.
QQQ Breaks Below Its Triangle: One Structure Has Ended, the Next Has Not Begun
A narrowing range is usually read as hesitation. It is better understood as the temporary withdrawal of the evidence that directional conviction depends on.
Reading Market Turns With Leveraged Relative-Strength Ratios
A conventional relative-strength ratio compares two unrelated instruments. The LRS ratio compares same-source instruments that differ only in leverage — AAPL/TQQQ, TQQQ/QQQ — to read whether the market is rewarding leverage or punishing it.
The Gap Between Global Market Weights and What Investors Actually Hold
The distribution of world equity market value is a verifiable fact. What most investors actually hold sits a long way from it, and the direction of the gap is the same in nearly every country.
The Long-Run Record Outside the United States
United States equities delivered among the strongest returns of any major market across the past century. Using that record to infer the long-run characteristics of markets generally runs into several structural problems.
How Currency Eats or Amplifies Foreign Returns
The return on a foreign asset has two components: what the asset did, and what its currency did against the investor's own. The second is frequently large enough to dominate the result.
The Blurring Line Between Developed and Emerging Markets
The developed and emerging classification directs trillions in allocation. The gap between the criteria behind it and present reality has widened across the past two decades.
Japan: Thirty Years and Governance Reform
Japanese equities spent three decades below their nineteen eighty-nine peak. Among the changes of recent years, corporate governance reform is one of the few with a structural character.
Where the European Discount Comes From
European equities have long traded at lower valuation multiples than United States equities, and the gap widened across the past two decades. Part of it is structural and part is arithmetic arising from composition.
Taiwan: Market Concentration and Global Linkage
Taiwan's weight in global equity market value is modest while its sector concentration ranks among the highest of any major market. That structure determines its volatility characteristics and what it moves with.
The Korea Discount: Governance and Structure
Korean equities have long traded below markets at comparable levels of economic development, a phenomenon with its own name. Its causes have been widely studied, and most explanations point towards governance and ownership structure.
India: Scale, Valuation and Access
India's weight in global indices rose substantially over the past decade. Its scale, valuation levels and the conditions facing foreign investors form a set of interrelated characteristics.
The Investability Question in China
A clear gap exists between the size of China's economy and the weight its equities carry in global indices. The gap arises from a set of technical and institutional conditions, and understanding them is more useful than assessing any single event.
How Emerging Market Index Weights Are Set
Country weights in emerging market indices direct hundreds of billions of dollars. Those weights come from a specific set of technical rules that the people relying on them rarely examine.
Pricing Multinationals in a Deglobalising World
A substantial part of what multinational companies are worth rests on the operating conditions globalisation provided. As those conditions change, valuations adjust in a way that differs from an ordinary cycle.
Trading Session Overlap and the Distribution of Volatility
Global equity markets open across different time zones, and volatility is not spread evenly through a trading day. The structure of session overlap determines where liquidity and price discovery concentrate.
Depositary Receipts and Ordinary Shares: Two Prices, One Company
Depositary receipts let investors buy foreign companies in their own market and currency. The same company therefore has two prices, and the relationship between them has several details worth understanding.
How Tax Erodes Cross-Border Returns
Tax treatment of foreign investment is spread across several layers, and their combined effect regularly exceeds what investors expect. These costs can be established in advance and are rarely included in return estimates.
How Sovereign Risk Enters Equity Valuation
The same company listed in different countries can carry systematically different valuations, and part of that has nothing to do with the company. It reflects how the market prices the country's overall risk.
The Cyclicality of Commodity Exporter Markets
Economies built on resource exports produce equity markets with stronger cyclical characteristics than most. The source and amplitude of that cycle determine the role such markets play in a global allocation.
The Size of Global Bond Markets and Its Effect on Equities
The global bond market is larger than the global equity market, and most investors allocate their attention the other way around. The state of the bond market affects equities through several channels, and understanding those channels is more useful than remembering the size.
How Pension Systems Shape Local Markets
A country's pension system determines how long-term capital enters the market, and that profoundly influences the structure, depth and volatility of the local market. The factor is slow and durable, and it is frequently overlooked.
Why Sector Composition Differs So Much Across Markets
Two countries of similar economic size can have entirely different sector compositions in their equity markets. That difference affects the validity of cross-country comparison, and its causes do not fully match the structure of the economy itself.
How Cross-Market Correlation Changes in a Crisis
The benefit of diversification rests on markets being imperfectly correlated. That correlation rises during crises, so the protection weakens at exactly the moment it is most needed.
The Drivers of Cross-Border Capital Flows
Cross-border capital flows can be large enough to dominate a market's short-term direction, and a substantial part of what drives them sits outside that market. Understanding these drivers helps separate local information from external capital.