Some observations from Macquarie on the sad state of constant confusion plaguing investors around the globe, presented without comment.
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Twilight between Ignorance & Confusion
“In the middle of the journey of our life I found myself within a dark woods where the straight-way was lost” Dante Alighieri;
“There is a fifth dimension beyond which is known to man…is the middle ground between the pit of man’s fears and the summit of his knowledge”, Twilight Zone
The last several weeks were exceptionally interesting.
Following Brexit, virtual implosion of the Italian and Portuguese banking sectors and poor May payrolls, investors witnessed a jump in June payrolls as well as full panic mode by the central banks and public authorities, including: (a) expected BoE easing; (b) potential Japanese “helicopter money”; (c) growing calls for public/taxpayer re-capitalization of the Eurozone banking sector; (d) expectations of further easing in a plethora of countries including Korea and Singapore; India and Australia; and (e) acceptance that the Fed cannot tighten.
The result was that correlation between asset classes jumped, with both risk-on and risk-off assets delivering strong returns:
- Equities recaptured pre-Brexit highs, driven by the perception that central banks and public instrumentalities would panic sufficiently not to worry about asset bubbles, and hence so long as corporates can squeeze-out even tiny EPS growth rates, the stage is set for a further equity rally;
- Global Bonds delivered some of the strongest gains ever, as yields collapsed across the entire term structure for both DM and most EMs. Guyen that over US$12 trillion of sovereign bonds are now trading at negative yields, the chase for yields has been exerting massive gravitational pull. At the same time, term premium has collapsed (in the case of the US into deeply negative territory) as investors accepted that risks of CBs tightening is virtually non¬existent whilst at the same time investors do not currently see any signs of inflationary surprises (refer discussion below);
- Gold has also delivered strong retums, driven by investor understanding that the current policies would ultimately result in either deflation or stagflation or hyperinflation (all good outcomes for gold).
Can one make any sense of these erratic changes? Our answer is no.
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So, just BTFD then.
The post Macquarie Asks “Can One Make Any Sense Of These Erratic Markets? Our Answer Is No” appeared first on crude-oil.top.