There have been “massive” outflows from capital markets in the past week, but although they brought Bank of America Merrill Lynch’s “bull and bear” indicator close to the “buy” signal, they haven’t managed to trigger it.
The year-to-date capital flows seem to show a dramatic change in the way investors perceive risk in the stock markets. Emerging market equities, Japan and the financial sector seem to have turned from risky assets into “safe havens”.
Inflation will almost certainly go up, despite fears expressed by some policymakers and analysts that the world’s major economies are headed for deflation, research by insurance and pensions provider Legal & General shows.
Japan’s stock market could see a sharp rise if the government cuts the depreciation allowances for companies in tax legislation, according to Andrew Smithers, economist and author of The Road to Recovery.
The price of oil is already very high by historical standards, with Brent staying above $100 per barrel because of tensions in the Middle East and uncertainties created by the Arab Spring, Tom Pugh, commodities analyst at Capital Economics, said.
But growing supply and relatively slow demand is likely to push oil prices lower over the next five to 10 years, he wrote in a market note.
A “sell” signal may be approaching for global stocks, according to strategists at Bank of America Merrill Lynch, who at the end of last week published a chart showing inflows into equities, as well as stock prices, climbing towards levels that would trigger selling.