Risk Assets Have Front-Run Reality (w/ Tian Yang) | Expert View

Описание: Risk assets have rallied aggressively in the first quarter of 2019, in what appears to reflect an anticipation that global central banks will repeat the reflation trade that they initiated in early 2016. But Tian Yang, head of research at Variant Perception, believes that investors may be ignoring the shifts in central banks' priorities and in the inflation picture that have transpired between then and now. For that reason, the recent divergence between asset prices and leading indicators could leave many markets looking vulnerable, Filmed on March 19, 2019 in London. Variant Perception’s research note ‘No Deja-Vu: 2016 Reflation Analogy Does Not Fit’ was published on Real Vision’s Think Tank on March 14, 2019. Variant Perception’s research note ‘Understanding Bear Markets’ can be found on their website by clicking here: https://bit.ly/2HKqh3M

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Risk Assets Have Front-Run Reality (w/ Tian Yang) | Expert View
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Transcript:
For the full transcript: https://rvtv.io/2HZ94DJ
What're seeing this time around is a V-shaped bottom. It's gone down and it's gone straight back up. And if we do go on to make new highs, and in hindsight, this is the bottom, this will be incredibly rare historically. GDP doesn't go from, like, 2 to 1 to zero to minus 1, right? It's going to go along at 2, and then the next print is zero and it's minus 3, it tends to be a lot more of a gap. You can see that Swedish
indicators have basically collapsed. So that's telling you there's more pain to come. My name is Tian Yang, head of research at Variant Perception. So at Variant Perception, what we focus on are leading economic indicators. If you look at the way the economy works, it tends to be more mechanical than people realize. There's a fixed sequence in which things have to happen in the economy. For example, building permits necessarily have to go up before construction activity can pick up. Similarly, if you're an employer, you would typically hire or fire temp workers before you would
hire or fire a full-time worker. So temporary employment will tend to turn before full-time employment. So if you look for these, kind of leading, coincident lagging relationships within the economy,
then it'll give you a much better sense of where the economy is going. It's almost like when you're driving a car and you see the car in front do something with indicator lights and you know they're going to turn before the car actually moves. That's what we're trying to do with lead
indicators Lead indicators are not necessarily new. They've been around since at least the 1980s, you know the likes of Geoffrey Moore wrote the original academic papers on it. However, what we are
trying to do is actually apply it in a robust and repeatable way to real-world investing. So it's kind of like the Yogi Berra quote about, in theory, there's no difference between theory and practice, but in practice, there might be. And so it is with leading indicators. A lot of traditional approaches to economic research are very theoretical in nature. You know you go to the World Bank, IMF, download the database, run your model. But in the real world, data is revised. You see the GDP print come out, and a few months later it's revised.