It is becoming increasingly difficult for central banks to surprise the markets with good news. No matter how dovish they are, investors expect them to be even more dovish still. This financial repression has facilitated the rise of populist politicians, who threaten to bring the end of central banks’ independence.
Central banks are trying to prolong the decade-old bull market, but it looks like instead of reassuring investors, this makes them nervous.
January was an extraordinarily positive month in the markets for virtually all assets, after a horrible 2018 — and it’s all due to the Fed. The US central bank executed a massive U-turn in its monetary policy and, while many observers like to point to low inflation as the reason for the Fed’s aborted effort to normalise monetary policy, something more sinister is behind it.
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.
The financial crisis of 2007-2009 has left a lot of collapsed Spanish castles in its wake, hitting Spanish banks hard.
Pictures of Spain’s ghost towns were splashed across the world’s newspapers at the beginning of the eurozone debt crisis. True, they weren’t as impressive as the Chinese ghost cities, but they show what excess debt and an inflated real estate sector can do to a country – and to its banks.
However, more than five years on since the crisis, the story is slowly changing.