Whenever there is the threat or the reality of recession, it usually follows a typical pattern. It is engendered by tight financial conditions, a real or market bubble bursting, a dramatic rise in the price of oil, or a combination of the above. This time it is different: a stay at home recession.
The 2020 economic slowdown isn’t due to any of the usual suspects, namely the US Treasury … Read the article
The new year has started with a blunt reminder of probably everything that investors wanted to forget over the holiday season: economic data is worsening while the oil price continues to fall, dragging down equities and the most equity-like fixed income asset classes. Traditional safe-havens continue to rally, as they did in 2018.
The year left behind ended far worse than it started: after a st… Read the article
If investors enjoyed a dream Goldilocks scenario in 2017 in which growth was hot enough to lift earnings but not too much to warrant sharp rate hikes, many expected 2018 to be more like the year of the bear, marked by a significant rate hiking cycle – until last week. US Fed chair Jerome Powell said the current policy rate is just below the non-accelerating rate of inflation – a sign that the … Read the article
Ten years after the outbreak of the Global Financial Crisis (GFC) it is time to pause and reflect about an event whose consequences still have a major impact on financial markets and people’s daily lives. In his book “Crashed: How a decade of financial crisis changed the world,” UK economist and Columbia University professor Adam Tooze challenges the way the GFC has been storified, points at so… Watch the video
An escalation of diplomatic tensions between the US and Turkey and Russia triggered a global fixed income sell-off that particularly hit Emerging Markets (EMs), and led to a safe-haven rush, with US Treasuries, Swiss and German bonds in heavy demand. The risk-off mode intensified towards the end of last week, when the Turkish lira plunged 18% in two days as a deadline for Turkey to release a US… Read the article
This week on BVTV, I have a look at past US interest rate cycles. With new Fed Chair Jerome Powell now in the hot seat, bond investors are keen to understand whether he will be more hawkish than his predecessor, Janet Yellen. Turning to the UK, the market is now pricing in a high probability that the Monetary Policy Committee hikes interest rates in May, but the flattening of the gilt curve may… Watch the video
Investing in public securities, whether equity or debt, is driven by two primary desires; firstly a need to save for the future, and secondly the requirement to see these savings grow. This results in a need for investors to pursue low risk and high growth investments. In order to understand these risks, assets get categorised based on their potential and historic risk characteristics. Broadly… Read the article
Today marks five years on from Mario Draghi’s now famous ‘whatever it takes’ remarks, widely credited with sparking a reversal in the Eurozone’s fortunes.
Below are five charts offering some insights into the European Central Bank’s successes and failures in the ensuing period, as well as some of the challenges that remain.
- Funding costs in the periphery
Five years ago, funding costs for the … Read the article
1. The ECB can act quickly when considering if a bank has reached the point of non-viability (PONV), and enacting a resolution plan. The speed with which regulators acted clearly took the market by surprise. At the same time, how the regulator determines a bank to be non-viable is still a grey area (considering the situation around some of the weaker Italian banks).
2. EU stress tests are not… Read the article
It is hard to remember a time when there was so much disagreement around the outlook for corporate bond markets and risk assets. Some investors remain sceptical about the underlying strength of the rally and are uneasy at the pace at which secular stagnation concerns were washed away by the election of Donald Trump. Other investors, hesitant to hold cash or in negative yielding short-dated gove… Read the article