Finlight Research - Market perspectives - Dec 2014

Market Perspectives
December 2014
Dec. 4th, 2014
www.finlightresearch.com
Time for a Santa Claus Rally?

“You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run
You never count your money
When you're sittin' at the table
There'll be time enough for countin'
When the dealin's done.”
-Kenny Rogers, "The Gambler"
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FinLight Research | www.finlightresearch.com

““This is a big, big gamble to be manipulating the most
important price in free markets, interest rates. These
purchases are canceling market signals. The bond
market and the stock market have provided wonderful
signals for many years as to potential problems. And
when you cancel those signals, you could run into a
problem. I don’t know when it’s going to end, but my
guess is it’s going to end very badly.”
– Stanley Druckenmiller
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Executive Summary: Global Asset Allocation
We are heading towards another year of massive liquidity boost to the
financial system.
Economy is reiterating the same message of modest growth. But stocks
continue to rally thanks to the current environment of unprecedented
monetary stimulus across the globe.
U.S. economic activity is gradually improving, supported by a better job
growth, improving private sector demand and higher government spending.
Japanese growth momentum is faltering. Europe is nowhere with high
unemployment, and deflation worries.
Nevertheless, we are struck by how extreme optimism appears in
investors’ sentiment surveys, relative to history.
According to most measures, broad equity indices trade at valuation
above average levels, especially in the US
But expansionary monetary policies, low interest rates and abundant liquidity
are still keeping us from moving to an underweight on equities. We
remain neutral on global equities and think earnings growth should be the
only driver of markets from here.
And contrary to the common belief, lower oil is not necessarily bullish..
We remain underweight government bonds and corporate credit overall
(but with an intra-asset class preference for IG vs HY, and Eurozone non-financials
IG vs US IG), and Overweight US dollar (supported by divergence
Fed policy from that of the ECB and BOJ).
We summarize our views as follows
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MACRO VIEW
The Good
US 3Q GDP was surprisingly revised higher to 3.9%.
Strong ISM manufacturing (58.7) and services (59.3) survey
The “easy-money” central bank cartel has a new member: The People’s Bank of China has
finally joined the easy monetary policy bandwagon, by announcing a surprising rate cut.
Lower oil prices is positive for consumers and growth (especially in the Eurozone)
The Bad
Japan has entered its fourth recession since 2008, with year-over-year real GDP down to -1.2%
and two consecutive quarters of negative growth.
Personal income, personal spending and consumer confidence have disappointingly missed
expectations
Total pending home sales seem to be lethargic
Lower oil prices threaten (and increase bankruptcies in) US shale plays
The Ugly
Main systemic risk resides in China : China’s economy is supported by approximately six
trillion dollars of 'shadow debt', which may eventually create major systemic issues. Last
surprise easing by the People’s Bank of China is adding to our cautious view on the Chinese
economy.
We are building a boom-bust economy that is increasingly dependent on central bankers
inflating policies. The end game is clear even if the timing is anything but.
5

The overall picture had been one of slow recovery, but there is no indication of a recession using the
6
The Big Four Economic Indicators
indicators monitored by the NBER.
At -0.11%, Industrial Production for Oct. ‘14 was disappointing again
Real Personal Income less Transfer Receipts rose 0.23% and is now increasing at 2.30% YoY

7
Durable Goods New Orders
Durable goods new orders
came in at 0.4% in October.
However, we exclude both
transportation and defense,
the number was down -2.5%
MoM (but still up 5.2% YoY)
The gap between the
SP500 and the Durable
Goods New Orders is getting
larger.

8
Wage Growth
Stagnation in real wages is one of
the main features of the ongoing
recovery.
The growth of inflation-adjusted
wages from the start of the
current recovery is the weakest
in history.
Low wages are clearly weighing on
personal income

9
PMI Data
Markit Eurozone 'Flash' PMI data
points to a slowing in economic
growth to its lowest level over the
past 14 months. Recession is
becoming a real threat to the
Eurozone.
November's US 'flash' PMI also
shows the slowest rise in US
business activity since April. We
expect a lower GDP growth over
Q4-014.

10
Crisis Long-Term Effect
According to researchers from the
Fed, 2008 recession was severe
enough to leave permanent
economic scars.
The trend of real GDP has suffered
a significant drop.
The US, UK and Euro appear to be
slowing down again since the
crisis, despite continual QE.
The most worrying chart remains
that for the Euro area.
Source: Federal Reserve paper “Potential Output and Recessions: Are We Fooling
Ourselves?”

11
GS – Global Leading Indicator (GLI)
GLI is back into ‘Contraction’
phase, defined by positive but
decreasing momentum
6 of the 10 underlying components
of the GLI worsened in November
We’ve been thinking for a while
that the current acceleration
remains quite modest for a
typical expansion phase.
Available data is more indicative of
a stable macro environment rather
than one with a growth pulse.
More data are still needed to
confirm our fears about the current
economic situation.

12
US Real Estate Price Trends
Both US real estate indices (Case-
Shiller Composite 20 Index in the
upper chart and FHFA Housing
Price Index in the lower chart) are
still in uptrend mode, but their
growth is clearly slowing.

13
Chinese Economy
Chinese manufacturing has been wavering in and
out of contraction over the last 3 years
According to the HSBC/Markit flash data, China
manufacturing PMI and output are now back in
contraction:
“Flash China Manufacturing PMI™ at 50.0 in
November (50.4 in October). Six-month low.”
“Flash China Manufacturing Output Index at 49.5
in November (50.7 in October ). Seven-month low”
On Nov. 21st, People’s Bank of China decided to join
the easy monetary policy bandwagon, by announcing a
surprising rate cut.
Source: HSBC Markit

End of November, we’ve seen another central bank-driven rally fueled by the surprise easing by China
and the positive commentary from Draghi . But, defensive sectors, Small Caps, Treasury yields, high
yield are still not confirming the excitement in equity indices
At current valuation levels, the risk-return profile for equities appears less attractive and should imply
some cautious. Rationally, the upside on stocks is exhausted by a limited multiple expansion and
margins being at peak levels. But the current environment of unprecedented monetary stimulus
across the globe is making rationality irrational.
We are still puzzled by the incredibly high correlation between Treasuries and the SP 500, mainly
explained by the belief that lower rates are good for stocks. We should keep in mind that lower rates
could also be a translation of faltering growth and lower inflation expectations. And this is hardly good
for equities.
Thus, we remain Neutral equities. At this stage, expansionary monetary policies, low interest rates
and abundant liquidity are keeping us from moving to an underweight on equities. Even bad news
for the economy (in Europe, Japan and China) appear as good news for stocks, as they allow for further
stimulus.
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EQUITY
At these levels, the stock market is clearly not the economy!
We are also struck by how extreme optimism appears in investors’ sentiment surveys.
We think it is wise to incrementally de-risk your portfolios by focusing on higher quality / more
defensive / more favorably priced companies.

Assessing the effects on growth of the lower oil prices is more tricky than most people think. Lower oil
No doubt, the sharp decline in oil prices will give a strong boost to consumers (especially in the US).
BUT, even we forget about all the state budgets that rely on a minimum level of crude, it creates
bankruptcies in shale plays, killing growth from that sector, increasing instability in connected sectors
and increasing global risk aversion. It also intensify the disinflationary pressure in the eurozone.
We remain Neutral for the moment. We will revise our view to OW after a clean break of the 2075-
2100 range (threshold moved 35pts up because of BoC surprise easing) on the SP500, and to
UW below the trend from Nov. ‘12 lows
We move from UW to Neutral on Europe vs. US, as ECB eases further. We look for the ECB to
We remain OW on Japan (always on an FX hedged basis) on the back of an aggressive BoJ
The coming rate hikes (probably in Q2-2015) will depress all asset prices for at least part of next
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EQUITY
is not necessarily bullish. If the collapse in crude were bullish, we should see small-caps
outperforming large-caps. Is that the case?
Bottom line :
introduce purchases of corporate bonds in Jan. ‘14 and sovereign bonds in Q2-2014.
intervention, a weaker yen and good earnings growth.
We remain UW in US small caps vs large caps
year, in our view

16
Earnings
The blended earnings growth rate
for Q3 2014 is 8%, up from 7.3%
last month
Of the 495 companies that have
reported earnings to Nov. 28th, for
Q3 2014, 77% have reported
earnings above the mean estimate
and 59% have reported sales
above the mean estimate.
Of the 95 companies that have issued EPS guidance for the
Q4. 76 (or 80%) have issued negative EPS guidance
Analysts are still cutting earnings estimates for future
quarters
Q4 earnings are currently projected to grow at 4.2%, which
seems quite low for this early in the estimate game,

According to Thomson Reuters, the forward 4 quarter earnings estimate for the SP 500 stands at
SP 500 trades around 16.1x its forward earnings. This is historically a high P/E multiple.
SP 500 may rise to 2100 over the next 12 months, but P/E expansion phase seems over (but
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Earnings
$126.15 (down from previous week: $126.48)
we do not exclude a pick around 17x)
We expect SP500 P/E multiple to start contracting, probably with Fed hikes in Q2 or Q3-2015

18
Profit Margins
SP 500 net profit margins have expanded to
9%, mainly driven by the IT sector (with its 17%
margin)
Current net profit margin are at record historical
levels.
From here we expect profit margins to
stabilize before contracting, when
consensus expects expansion to 9.8% in
2015.
IT sector should remain a key driver of SP
500 net profit margins over a 12 month horizon.

19
QE and Equities
QE has been pushing stocks
higher
Wealth creation through
rising equity share prices
was one of the main
purposes of Fed balance
sheet expansion.
Ben Bernanke was right
when he said “The
problem with QE is that it
works in practice, but it
doesn’t work in theory.”
Relative to the U.S. and
Japan, the European equity
market is a rally waiting for
ignition.

Different sentiment indicators show that investors across the board are extremely optimistic
Advisory sentiment (IIS Index) shows 43% gap between bulls and bears (96th percentile). Individual
investors sentiment (AAII index) is at its 90th percentile. Active investment managers (NAAIM) are
reporting high exposures to equities (92nd percentile).
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Investors’ Sentiment
about U.S. equities.
On average, such an extreme sentiment points to flat returns on over the following 12 months

We watch 4 long-term indicators : 2 P/E ratios and Q Ratio through their deviation to their arithmetic
Based on the average of these indicators, the market looks 80% overvalued (the highest level outside the
Tech Bubble, up from last month’s 70% overvaluation), suggesting a cautious long-term outlook
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SP500 – A Long-Term Perspective
means and the inflation-adjusted SP Composite deviation to its exponential trend.

22
SP 500 – A Long-Term Perspective
SP 500 CAPE ratio points to a forward 10-year total return around 5% p.a.

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SP 500 – A Short-Term Perspective
All exhaustion patterns
have been ignored to date.
Technically, the SP500
seems to be forming a
“mega-phone” pattern
At this stage, we favor a
top formation within the
2075-2100 range
Our view will prove wrong
if the uptrend going
through the highs since
mid-2013 (~2100) is clearly
broken.
A similar pattern is forming
on the Dow.

24
Eurostoxx 50: A Short-term Perspective
Since April ‘14, the Eurostoxx 50
has consolidated below 3248.
The main levels to watch are 3248
– 3300-3325 (April highs)
Breaching these levels up would
drive the spot to 3600
(downtrend from March 2000)

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US Stocks vs Global Peers
U.S. stocks have outperformed
their global DM peers by more
than 60% over the past 5 years.
Does that mean that the U.S.
economy is going to decouple
from the rest of the world ?
From our point of view,
decoupling is an unrealistic
hypothesis in the global
economy we live in Expect
re-convergence (one way or the
other)

26
US Stocks vs Govies
We are still puzzled by the
incredibly high correlation
between Treasuries and the
SP 500, mainly explained by
the belief that lower rates are
good for stocks.
It looks like we’ve switched
to a new regime at the end of
2013.
We should keep in mind that
lower rates could also be a
translation of faltering growth
and lower inflation
expectations. And this is hardly
good for equities
Source: Danske Bank Macrobond Financial. G3 = US, Germany, Japan

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US Stocks vs High Yield Credit
Divergence between US stocks and US
High Yield is getting wider. The HY yield is
ticking higher like it did before June-July
and the Sept-Oct pullbacks.
Risk-seeking behavior is clearly less visible
in HY than in equities. This is puzzling
given the global bullish sentiment. Should
us take it as a warning signal?

The model is still modestly short and targets 2062-2042-1962 on the downside and may review
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Trading Model – SP500
Our prop. Short-Term trading model went modestly short on Oct. 24h at 1964.58 on the index, and
reduced its position just above 2050
its position at 2082 and 2103.

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FIXED INCOME CREDIT
Nothing new compared to our previous reports. We still look for the bear market on USTs to resume.
We’ve been UW on 10y-UST for a while now, expecting 10-year yields to reach 2.90%-3.20% over
next months, because of sustained US growth, increasing US inflation. As said in previous reports,
only a material weekly/monthly close below the 2.40-2.30 range could make us change our mind.
Since end of Sep. ‘14, we’ve been questioning our underweight positioning, as U.S. 10-year
yields was ticking below the 2.40-2.30 range. We’ve decided to move to Neutral each time the 10y
yield goes below 2.25. We actually did that for a few days around Nov. 28th. But we moved UW since
Dec. 2nd.
Falling inflation expectations and disappointing growth largely explain the level of Eurozone yields. We
expect the coming ECB QE in government bonds to keep German bond yields at very low levels.
While we are neutral on German yields, we think US yields are too low for the current growth and
inflation outlook.
We have been OW Eurozone vs. US and UK for a long time now. We are aware that the ECB is
probably planning to buy government bonds during 2015. But given the record levels reached by
yield gap between Treasuries and Bunds, we prefer to change our position to Neutral.
We expect the Fed to start tightening from Q2-2015 and will hike rates more than is currently
priced in: The markets are still only pricing in about one hike from the Fed next year. Based on Fed’s
speech, we expect 3 or 4 hikes instead. Thus, the re-pricing of Fed expectations is likely to take
place very soon in the short end of the curve.

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FIXED INCOME CREDIT
While US yields in the short end are expected to go higher, the medium to long end of the curve will be
supported by abundant liquidity. We expect a significant flattening of the US yield curve.
High Yield has fared poorly relative to most other areas of the investable landscape. We see
investors moving up the quality spectrum, selling high yield bonds and growth sectors and getting into
investment grade bonds, govies and defensive sectors. This is probably a sign we are moving into
the final stage of the bull market and economic expansion
The ECB is probably planning to buy corporate bonds directly, but even if not, its purchases of asset-backed
securities and covered bonds may lead to investors adjusting portfolios towards this asset class
We remain UW on corporate credit, due to valuation, to position within the credit cycle, to the
expected rise in government bond yields and given the weak total return forecast
Within the credit pocket, we now prefer Eurozone corporates (especially IG and non-financials) to US
corps, because of the coming ECB massive QE
We continue to prefer IG over HY on a risk-adjusted basis as we expect higher volatility on spreads
We remain OW on HICP breakevens (through forward 1yx1y for example) given the potential for a
sovereign bond QE
Bottom line : Still UW Govies, Neutral Eurozone vs. US Govies, Long flatteners on the US yield curve,
UW credit, OW Eurozone credit vs US credit, Neutral TIPS and OW HICP Inflation, UW High Yield vs
High Grade, Neutral on EM corporates

31
10y US Treasury Yields
Government bonds have continued to fool all of us, as inflation slumped below predictions
But, like many others, we still expect higher interest rates over a 12 month horizon.

32
10y US Treasury Yields
For the last 3 months, we’ve been
questioning our underweight
positioning, as we saw U.S. 10-year
yields ticking below the 2.40-2.30
range. As explained in a previous
report, we decided to move to
Neutral each time the spot goes
below 2.25.
We still think that the structural
channel that has been in place since
the late-’80s will be broken to the
upside over the next few months.
We will feel more comfortable with our
UW position if the 10y UST yield goes
above the important resistance at 2.35
and 2.47.
The risk is that the 10-year yield eases
to 2.13%, and possibly to 2.06% in the
period ahead
Source: CQG

33
Treasuries vs Bunds
The yield gap between Treasuries and Bunds is at record levels, as the 10y Bund yield hit a record low
of just 70bp
We decide to switch from OW to Neutral on Bund vs. USTs
Source: Goldman Sachs

34
US Credit
The spread widening on US High-Yield is still underway. It’s now drive by the fear of more defaults in
the energy sector (US HY carry a big exposure to that sector) after the sharp drop in oil prices.
As expected US High-Hield has continued to underperform US Investment-Grade
Spread between US HY and US IG

35
US Credit
The US HY underperformance since end of Oct. was mainly due to the energy sector. In the US,
energy (mainly shale oil gas) represents 15-20% of HY benchmarks.
According to a GS analysis, the cumulative 3y energy default rate may reach 8% if the WTI stays below
$75/Brl and even 25% if the barrel stays below $65.

36
Eurozone Credit
ECB has already started buying ABS and covered bonds.
ECB seems to be considering buying :
sovereign bonds, but how to do that legally?
corporate bonds directly, but how to manage the underlying
valuation and risk issues?
At this stage, we’ve seen nothing about the Bundesbank point of
view.
Anyway, the market seems to have started to speculate that
corporate bonds would be included into the ECB purchase
program
We now prefer Eurozone corporates (especially IG and non-financials,
as financials will be hardly included in such a purchase
program) to US corps, because of the speculation about the
coming ECB massive QE
Our strategy will be “buy the rumor, sell the news”. I will get out as
soon as the information becomes official.

37
EXCHANGE RATES
Policy divergence between the US on one hand, and Japan and the Eurozone on the other, should create
an environment supportive of the dollar
We continue to expect the USD to strengthen against the major crosses, especially EUR and JPY
Things are going very fast. Our targets on EUR-USD and USD-JPY have been already reached.
On both pivots, a short-term consolidation is getting more plausible, but without changing anything to our
bullish views on USD
Additionally, the expected EUR1tn balance sheet expansion of the ECB should lower euro ~10%!
The US Dollar Index (DXY) continues to consolidate just below 88.70, and may enter a corrective phase
bringing it to 84.80
The EUR-USD underlying structure still looks very negative. Our ST target of 1.24 was finally
reached. The break of this pivot will open the door to 1.21-1.20. Thus, we remain UW EUR-USD as long
as the pivot stays below 1.25 and move Neutral above to play the correction towards 1.30
BoJ intervention has weighed (more than expected) on JPY. Our target of 112.40 was reached. We are
now very close to our following (medium-term) target of 119.30. We remain OW as far as the pivot
stays above 116. We still target 124-125 over the medium-term
Being OW USD-JPY is a good manner to gain exposure to the lack of economic direction in Japan till the
coming lower house election.

38
EUR-USD
Our ST target of 1.24
was finally reached.
EUR-USD has some
difficulty to go through
1.2395.
The break of this pivot
will open the door to
1.21.But A correction
phase is becoming
plausible.
We remain UW EUR-USD
as long as the
pivot stays below 1.25
and move Neutral
above to play the
correction towards 1.30
Our long-term view
remains biased towards
a strengthening of USD
(target ~ 1.10 then parity)

39
USD-JPY
Things are going very fast.
Our target of 112.40 was
reached. We are now very
close to our following
(medium-term) target of
119.30.
The resistance around
119.30 may hold for a
moment and a consolidation
towards 117-116 seems
possible .
But we are biased towards
the view that the USDJPY
will break out of the 119.30
threshold before the coming
election (mid December).
A clean break of this
resistance will push the pivot
to our medium-term target of
124-125.

40
COMMODITY
Over November, the biggest development has been a breakdown in oil prices and a sharp drop in
precious metals
A strong USD is also a big headwind to commodities
We continue, however, to like owning the GSCI index, and to think that commodities hold value as
cross-asset portfolio diversifiers.
We remain OW commodities but with a dispersion in views across the different sectors. At this stage,
individual fundamentals matter a lot!
We continue to favor commodity futures with steep backwardation (for positive carry).
Unfortunately, roll returns have turned negative as many commodity curves have already moved into
contango.
Bottom Line :
Demand for base metals globally eased significantly in 2H2014 and has not yet recovered. We remain
Neutral on base metals (we prefer Aluminium, Zinc and Nickel to Copper), as US Dollar strength and the
Chinese slowdown is weighing on prices, and because of weaknesses in construction / housing sectors in
major economies (mainly affecting Copper and Nickel).

41
COMMODITY
We anticipate that agriculture prices will revert to 2009 levels. We remain UW on agriculture (except on
cocoa), as we think supply will continue to grow relative to demand
Precious metals are suffering from a stronger dollar and higher US rate rise expectations
Our target on gold (1170-1150) was reached. We will move Neutral on gold below 1150 and switch
progressively to OW (accumulate) as the spot slides down towards 1000-980, which is probably the final
leg down.
Our first target on silver (~17) has been reached. The spot has been very close to our second target at
14.70. We still think that Silver is probably ready for its final leg down towards 12.50. At current levels, we
move Neutral but, like for gold, we will switch progressively to OW (accumulate) as the spot breaks the
first material resistance around 14.70 and slides down towards 12.50
We’ve decided to keep our OW bias on energy as long as the $80 support zone is not clearly broken by
the WTI. But it was. We’ve stopped our losses and moved to Neutral, waiting for a clean break above
$80 to switch back to OW. We will move UW if the 59.5-60 band is breached down. Is the OPEC
going (early next year) to decide to stop the bleeding?

42
Commodity Indices Performance
In total return terms, commodity
indices are roughly back on their
levels in Dec. ‘08
We switched from UW to OW on
commodities in early H2-2014. It
was hardly a brilliant decision!
The poor performance of the asset
class since Jul. ‘14 is mainly due to
the energy pocket and to the USD
rally.
We keep our OW stance as we see the drop in
oil prices as overdone

43
Crude Oil - WTI
We were right on the big level we
mentioned in our previous report:
74.95-73.75.
Breaking this level down will
drive the spot to 64.25, the spike
low from 2010. Below there, the
$59.50-$60.00 band should slow
the descent.
However, given the speed of the
descent, we favor a corrective
bounce from 64.25, back to 73-75.
We remain Neutral, waiting for a
clean break above $80 to
become OW.
We will move UW if the 59.5-60
band is breached down.

oil was still up as much as 40% as recently as this past summer. The decline in the oil price over
the last few months has certainly closed this performance gap in a hurry. Oil is simply catching
down.
44
Crude Oil - WTI

45
Gold
Our first target on gold (1170-
1150) was reached.
We keep the view expressed in
our last report
Current levels should be
watched closely as we can
witness a powerful break below
1170-1150 towards 1000-980. In
that case silver will drop to 12.50
We move Neutral on gold
below 1150 and switch
progressively to OW
(accumulate) as the spot
slides down towards 1000-980

46
ALTERNATIVE STRATEGIES
Within the hedge fund complex, we’ve been OW Equity Market Neutral, CTA, Global Macro and Vol
Arb.
Global macro and trend following strategies were the best-performing hedge fund subsets in November.
The HFRX Macro/CTA index was up 1.7% for November, when the broader HFRX Global Hedge Fund
index gained 0.3%
Global Macro continues to post losses on (reduced but still) short Fixed Income positions in the US.
These losses were offset by long positions in Eurozone FI and US dollar
CTAs are firing on all cylinders! CTAs generated money on short commodity exposure (especially in
energy), long positioning on equity, fixed income and US dollar.
We maintain our previous positioning: While preferring risk diversifiers to return enhancers, on a risk-adjusted
basis, we keep our OW on:
Equity Market Neutrals both for their “intelligent” beta and their alpha contribution
CTA’s and Global Macro as a diversifier and tail hedge.
Vol. Arb strategy and prefer funds that trade volatility globally (all assets / all regions). This strategy
has shown a great ability in terms of protecting capital during adverse periods, and a volatility that
compares favorably with the hedge fund industry.

Bottom Line: Global Asset Allocation
It looks like we are heading towards another year of massive liquidity boost to
the financial system.
Economy is reiterating the same message of modest growth. But stocks
continue to rally thanks to the current environment of unprecedented
monetary stimulus across the globe.
U.S. economic activity is gradually improving, supported by a better job
growth, improving private sector demand and higher government spending.
Japanese growth momentum is faltering. Europe is nowhere with high
unemployment, and deflation worries.
Nevertheless, we are struck by how extreme optimism appears in
investors’ sentiment surveys, relative to history.
According to most measures, broad equity indices trade at valuation
above average levels, especially in the US
But expansionary monetary policies, low interest rates and abundant liquidity
are still keeping us from moving to an underweight on equities. We
remain neutral on global equities and think earnings growth should be the
only driver of markets from here.
And contrary to the common belief, lower oil is not necessarily bullish..
We remain underweight government bonds and corporate credit overall
(but with an intra-asset class preference for IG vs HY, and Eurozone non-financials
IG vs US IG), and Overweight US dollar (supported by divergence
Fed policy from that of the ECB and BOJ).
We summarize our views as follows
47

48
Disclaimer
This writing is for informational purposes only and does not constitute an
offer to sell, a solicitation to buy, or a recommendation regarding any
securities transaction, or as an offer to provide advisory or other services
by FinLight Research in any jurisdiction in which such offer, solicitation,
purchase or sale would be unlawful under the securities laws of such
jurisdiction. The information contained in this writing should not be
construed as financial or investment advice on any subject matter.
FinLight Research expressly disclaims all liability in respect to actions
taken based on any or all of the information on this writing.

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process in GAA
with factor
selection, risk
budgeting and
dynamic portfolio
protection
•Factor-based GAA Process
Provide assistance
with alternative
investments
(including real
assets) in terms of
profiling, and
integration in a
GAA
•Alternative Investments
Provide assistance
with asset
allocation and
related risk control
and/or risk
budgeting
techniques
•Global Asset Allocation
(GAA)
50

Finlight Research - Market perspectives - Dec 2014

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Finlight Research - Market perspectives - Dec 2014