Birgir Haraldsson and Mario Manna, co-founders of Nightberg, an independent macro strategy firm, talk to Profit & Loss about getting noticed in a crowded market and how data analytics is changing the traditional research model.
Profit & Loss: given your experience in the market, how have you seen financial research change over the years?
Mario Manna: Spending a lot of time on the buy side we’ve always been big users of research and it has changed quite a bit, in particular it’s become more siloed. So now you often have specialists carved out to cover a specific niche, firms have a US rates strategist, an EU rates strategist, etc, and so the research becomes narrowly focused and at risk of constantly reporting about a topic or asset when perhaps nothing much is happening.
Bob Savage, CEO of CCTrack Solutions, talks to Profit & Loss deputy editor, Galen Stops, about why geopolitical unrest this year hasn’t translated into more FX volatility.
This year has been marked by a high degree of geopolitical unrest and uncertainty, with Britain voting to leave the European Union, Italian banks struggling ahead of an important referendum later this year, questions being raised about the future of Europe and a divisive US presidential election.
Meanwhile the war in Syria continues, ISIS has not been defeated, Russia is considered to be actively attempting to expand its sphere of influence and there is the suggestion that some long-time US allies in Asia – such as the Philippines – could drift closer in their relations to China in the coming years.
Profit & Loss introduced a new format at Forex Network Chicago, which took place September 28-29. The second day was dedicated to the Profit & Loss Challenge, during which conference participants broke into working groups under five key topics: Geopolitics, Regulatory, Liquidity, Execution and Technology.
Raising the curtain on the day’s discussions during a new format on Day 2 at Forex Network Chicago, managing editor Colin Lambert kicked off with a series of questions to get the conversations going with topic speakers.
The Debriefing session brought together each of the five speakers after convening with their table heads to get feedback from each of the respective working groups, the results of which were presented in a panel discussion about the findings.
In the final act of Forex Network Chicago, The Debriefing session featured the five topic speakers providing an overview of the working group sessions that took place around each of the five topic working groups.
The main speakers and the table heads they worked with included: Geopolitics: Mario Manna, CEO, Nightberg, with support from table heads George Dowd, president, G. Dowd & Co; and Bob Savage, CEO, CCTrack.com.
Liquidity, fragmentation and geopolitics dominate closing conversations on Day 2 at Profit & Loss Forex Network Chicago.
After each of the five topic speakers gave their debriefing of discussions within the working groups, the conversation opened up between the panelists to explore some of the themes raised during the working group recaps.
Drawing on discussions around both liquidity and geopolitics, Chip Lowry, senior managing director, State Street Global Markets, kicked things off with the topic of de-globalisation, and whether the current trend of countries looking more inward is affecting liquidity.
When assessing which large tail risk events are likely to take place in 2017, speakers at Profit & Loss’ Forex Network London emphasised that there are other risk factors being overlooked that might have a greater impact on financial markets.
“Like last year, the tail risks this year are quite high compared to normal,” said Colin Harte, strategist and senior portfolio manger at BNP Paribas Investment Partners. “There are some quite material risks that – if they come to pass – could have a significant impact on markets.”
He noted, however, that many of the expected tail risk events from 2016 were less dramatic than expected in the end: sterling took an obvious hit after the Brexit result, but soon became range-bound again, while the Trump election victory actually led to a rally in the equity markets.
Geopolitics represents the single biggest threat to financial markets, warned Ben Bernanke, former chairman of the US Federal Reserve, at an event in Toronto yesterday.
Speaking at the Swell event hosted by Ripple, Bernanke noted that the financial crisis of 2007-2008 was so severe because different elements of the financial system has become so interlinked that stressful conditions in one area soon spread to other parts of the system. However, he argued that the financial markets are systemically safer now and that the biggest threats to these markets come from external sources.
The euro performed well in 2017, but can it keep going? Galen Stops suggests that political factors mean that this currency could surprise markets in 2018.
This time last year, the European Union was still grappling with the fact that one of its biggest members was poised to leave the club, people were nervous about a populist, anti-EU party winning the Dutch general election, and even more nervous about a populist, anti-EU party winning the French election and presidency.
As a result, markets were – understandably – pricing a lot of risk into the Eurozone.
The FX Global Code is now over one year old and is generally seen to have been a success in establishing a blueprint for conduct in the markets. The number of firms adopting has been steadily growing but at such an uneven pace that some are wondering exactly how successful it will be? Next week’s Forex Network Chicago conference will kick off with an armchair debate and a panel session looking at the impact of the Code from two perspectives.
Rather than moving in a synchronised manner, speakers at the Profit & Loss Forex Network Chicago conference predicted that emerging market (EM) performance has become divergent due to idiosyncratic factors within each country.
“In general, EM does well when you have at least two out of three things: one is global growth, two is a weak dollar, and three is lower US rates. So, if you look at this combination and where we are in the cycle, especially given all the easy money that we’ve had since 2008, I would be very careful with the emerging markets right now,” said Mo Grimeh, CIO at Mogador Capital Management at Profit & Loss Forex Network Chicago.
In this week’s podcast, Galen Stops lights the blue touchpaper and steps back to watch the fireworks by asking Colin Lambert about not only the Benchmark Fix, more specifically the research paper published this week, but last look as well following the news that a regional regulator is investigating the practice. Just to add to the mix, he also gets him going on another Lambert favourite, tracking error.
They also discuss the FX Global Code and fintechs and ask, ‘should they be adhering and signing up to the Code?’ and Lambert shares some reader feedback on this week’s opinion piece on FX options brokerage.