Corporate bondholders, beware. The wave of enthusiasm for this asset class, which has helped it to reach new heights, is now ebbing. A research paper recently published by the IMF illustrates the reasons behind this – although it must be said the paper does not represent the official position of the IMF.
If Brexit does go ahead (and probably even if it does not), the European Union is ready to chip away at Britain’s dominance in the financial sector. At least, that’s what a recent speech by François Villeroy de Galhau, the governor of the Bank of France, suggests.
The list of reasons to worry in the market is growing longer by the day, and investors keep taking money out of risky assets – among them, European ones.
The phenomenon has been dubbed an “exodus from Europe” by analysts at Bank of America Merrill Lynch, who say there is “no surprise that the outflow from European high grade and high yield funds has been much more sizable than outflows from emerging markets debt funds.”
Last month has become known as Red October, not so much as a hint to the film starring Sean Connery as the commander of the defecting Soviet submarine by that name, but sadly, as an accurate description of the dominant colour on trading screens around the world.
When the governor of the Swiss central bank sounds alarmed, it is time to take notice. Switzerland, famous for its cheese but also for its prosperity, has built its economy around trade, and Thomas Jordan is worried that protectionism will now ruin it.
The Halloween effect is a well-known seasonal quirk that pushes stock prices up between October 31 and May 1. After a horrible October for stocks, investors are anxious to know whether the market rout is over or it has more to run.
There is one indicator that could provide some clues. We’ve spoken about it before on this website. Bank of America Merrill Lynch’s Bull and Bear indicator triggered a “Sell” signal back in January of this year, and it is now close to a “Buy” one – although not yet.
While all eyes are on Italy, the world’s second-largest economy is showing signs of trouble. China, this curious mix of communism and capitalism, is running out of steam – and ideas. Unless the Chinese government finds new ways to stimulate its economy, it might find itself facing the world’s biggest revolution.
We live in such strange times that most people don’t even notice how quickly certain principles that until not long ago appeared fundamental for Western societies are being eroded.
For those who are afraid of zombies, the Bank for International Settlements (BIS) has some bad news: they’re on the rise. What’s more, many people may be working for zombies.
But on the flip side, zombies may spook central banks enough that they don’t raise interest rates too high.
How afraid should investors be of the end of quantitative easing? Judging by recent comments, but also by the markets’ reaction until now, not too afraid.