The markets’ market economist – this is how Dr Peter Praet, ECB Chief Economist and Board member, described Lena Komileva, founder and chief economist of City economic intelligence consultancy (G+)ECONOMICS, following the ECB’s latest steps to adjust its forward guidance towards the end of QE and the future market rates path this month. And in the year that marks the first 10 year anniversary since the Bear Sterns and Lehman collapse, it is not hard to see why.
Lena was one of the very first economists to draw the link between a systemic regime change in global market dynamics, credit multipliers in real economies, recession risk and the central bank response in early 2007. After accurately calling the end of the Fed tightening cycle in response to subprime stresses in February 2007, months ahead of the consensus, she wrote to clients about the “impending credit crunch” on 1 June 2007, as stress signals from US subprime securitisation sectors reached Bund volatility indices, accurately predicting the balance sheet risk transmission from debt to equity markets and the collapse of the FX carry trade over the weeks that followed.
By January 2008, her economic model showed 85% probability that the US was already in a recession – twelve months before the National Bureau of Economic Research (NBER) confirmed it. As “dislocated money markets” – a term that Lena coined in the summer of 2007 - defied central banks’ short term liquidity stabilisation measures – Lena’s article in FX Week in March 2008, arguing that the disconnect between elevated emerging market asset valuations and riskier developed market credit impulses was unsustainable, became a prophesy for the steady rise and dispersion of market volatility in the summer of 2008 that ultimately culminated with the collapse of Lehman, the nationalisation of US mortgage markets and the start of a new era of central bank policy making that centred on balance sheet size, market liquidity risk premia and deflation tail risk probability management, over traditional rate and inflation targeting.
For the past decade, Lena’s “lower for longer” calls on market rates, against repeated consensus calls for early tightening from the Fed, the ECB and the BoE in the years between 2009 and 2014, preceded the steady flattening of the US yield curve. In recent years, Lena has repeatedly warned that the decoupling between the US business and financial cycle is harbouring distortions in US and global risk asset pricing, with significant consequences for the economic risk cycle. Her early calls on market policy mispricing and peak cycle dynamics over the course of 2017, and in particular her call that US 10yr yields are unjustifiably low in August 2017, have resonated strongly with the shift in the global policy tide over the past year and market developments in 2018.
Today Lena advises top tier investors, CEO and Exec Boards on financial, macro-economic and policy developments across core G+ markets, as chief economist at (G+)ECONOMICS, an international market research and economic intelligence consultancy based in London. With over two decades advising CEOs in banking, custodial, wealth management and legal and regulatory consulting services as head of market economics for the largest European government bonds broker in the world, Lena a regular voice at policy and industry forums, and an economic adviser, working with such institutions as the CFA Institute, the World Gold Council, McKinsey & Co., and the UK Parliament among others. Lena is a regular contributor for Bloomberg, the Financial Times, the Wall Street Journal, Reuters, and the BBC, and a leading independent voice in the international policy debate on global growth themes focusing on market efficiency, international capital flows and monetary analysis.