Alan Greenspan made the headlines at the beginning of this year when he said that the risk of a US recession was 1 in 3, and has since said that recession risk had risen. Larry Summers (former US Treasury Secretary and Chief Economist at the World Bank) put the risk at 50/50 in September. The truly horrendous data coming from the US housing market makes us think that the risk of recession is pr…Read the article
Data from Moody’s shows that the global high yield default rate fell to just 1.27% in September, the lowest rate since March 1995. The global default rate has now been below 2% for 25 consecutive months, the longest stretch since 1978 (when the high yield market didn’t really exist).
The steady decline in the default rate has been a bit of a surprise – indeed, Moody’s model has been predicting …Read the article
The US Treasury Department announced yesterday that August saw a record net outflow of $69.3bn from US assets (equities, notes and bonds). This is particularly alarming considering that expectations had been for a $60bn inflow. The outflow was a combination of international investors selling US assets, and US investors buying international assets.
Perhaps most interesting of all was that Chine…Read the article
See this link for an excellent summary of the impact of recent financial developments on the US economic outlook from Janet Yelen, President of the Federal Reserve Bank of San Francisco.
“In determining the appropriate course for monetary policy, we must recognize that most of the data available now reflect conditions before the disruptions began and, therefore, tell us less ab…Read the article
When the Bank of England meets every month, market commentators always focus on the nominal interest rate. But what many people fail to realise is that it’s not the nominal interest rate that matters, it’s the real interest rate (ie nominal interest rates minus the inflation rate). If nominal interest rates rise from 5% to 6%, but inflation jumps from 2% to 4%, then real interest rates have act…Read the article
The dichotomy in asset markets has many, myself included, scratching their heads. Whilst the last four months have seen falls in the European and US high yield bond markets of approximately 1.3% and 2.9% respectively, equity markets have continued their upward trend. In fact, over the same time period the DAX has returned circa 0.8%, the S&P 0.9%, the DOW 3% and the MSCI Emerging Markets Index …Read the article
The housing market is the transmission mechanism between Bank of England base rates and the UK consumer. The B of E cuts interest rates to encourage borrowing, which causes house prices to rise and homeowners’ pockets to swell. Higher interest rates slow the economy by restricting borrowing and suppressing the housing market. The state of the UK housing market is therefore one of the most impor…Read the article