It looks like the old saying “Sell in May and go away” has just been turned on its head. After cratering for seven weeks, the S&P 500 index ended last week up 6.6%
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Investors fear inflation but run to it
Recent capital flows highlight a paradox: investors are afraid of inflation, but seem to have increased their allocation to just the assets that would do worst out of it.
Continue readingWinners and losers from a Trump dollar intervention
Just as it was beginning to look like the bond market’s luck was finally running out, President Trump made some remarks that all but guarantee that the bond rally will go on for a little while longer.
As market bubbles keep inflating, signal gets close to ‘sell’
Investors’ optimism remained at very high levels, despite the beginning of tapering of quantitative easing by the European Central Bank (ECB), tensions with North Korea and the Catalan crisis.
Markets have their first head-on collision with Trump
Well, wasn’t last week a bit of a cold shower for investors. European stock markets closed lower and US ones were flat last Friday, after nonfarm payrolls badly missed expectations in March.
In fact, it’s a surprise the markets declined so little. Investors had other things to worry about, too: President Trump’s surprise airstrike on Syria was a big one. The president, who until not long ago was making positive noises about his Syrian and Russian counterparts, changed his mind after a chemical weapons attack that killed many children.
Investor optimism gets close to euphoria levels
The first quarter of 2017 is over, Brexit has been finally triggered and a period of political turmoil in Europe is ahead, with elections in France and Germany, and perhaps Italy too.
So far, it seems like nothing has been serious enough to give investors reason to pause the rally in stock markets. Both the US and the UK indices hit record highs — this could be a sign of confidence, but it could also mean the central banks’ easy monetary policies are still inflating asset prices.
The Fed is behind the curve, and happy to stay there
There is a widespread view that the Federal Reserve will have to raise interest rates at a steady pace this year, because it cannot afford to fall behind the curve.
I would argue that it has already fallen behind the curve and has no choice but to remain there. And it is not the only one in this situation. All major central banks are playing the same game; they have no choice.
Bank of England makes another monetary policy mistake
The Bank of England’s decision to borrow Mario Draghi’s bazooka has had immediate consequences: investors rushed into bonds like they’re the best investment out there. And what else could they have done? Ever since the financial crisis, central banks have dictated where investors should put their money, picking winners and losers in the markets with their asset purchases.
The risk rally looks set to continue
The recent risk rally still has legs — at least that’s the case judging by the Bull & Bear indicator compiled by Bank of America Merrill Lynch.
Post Brexit, loss of ‘coolness’ is the hardest to price in
The way the markets have reacted to Brexit, you’d be forgiven to wonder what the fuss was all about.