One of the key events of last week (and there were plenty) was the Fed’s decision and what Janet Yellen said in her press conference. Yellen shed some light (significant, I would say) about the Fed’s thought process towards the ‘normalization’ of monetary policy. Markets expected this information during the Jackson Hole meeting at the read more

There continues to be two fundamental risks or debates in financial markets: China’s convergence to pseudo-normal growth; and monetary policy normalization. Additionally, there is geopolitical noise, which has re-emerged in the last few weeks, and it matters at high frequency, but it is unlikely to have an effect on the global business cycle. Monetary policy read more

Markets this year, and especially these last few weeks, seem to be saying contradictory things. Major equity markets have shown no clear direction with non-trivial volatility. While on the other hand, debt markets seem to show a bearish global growth bias. There are many reasons for each of the markets to have done what they read more

Two weeks ago we participated in investor meetings at the Spring IMF Meetings in DC. One of the key concerns expressed by investors was a possible hard landing in China. By now this is a repetitive subject in our writings, but what concerns us as much as a hard landing is the apparently generalized view read more

The New different risks we highlighted in the previous note remain the 2 key market drivers: G7 monetary policy normalization (especially the US), and China’s business cycle and reform/rebalancing efforts. Obviously there are other themes and risks, as the US business cycle and the pace of the incipient European recovery, or the accumulation of emerging read more

The nature of the key risk factors has changed in a significant way. The main risk factors that threatened markets over the last 2-3 years have faded / been resolved / disappeared. Those risk factors shared a crucial feature, that their different resolution scenarios could and were imagined with some detail, and that their time-profile read more

Market dynamics changed some time in October, as we switched from watching and fearing mostly external factors and risks, to now being mostly dependent on its own fundamentals and risks. The global business cycle is now the key market factor. During the last 3-4 years the volatility in markets (therefore the downside risks) was mostly read more

The Fed saved the world economy during 2009, but has clearly inflated liquidity excessively in the last 2 years, and monetary policy normalization is long over-due. However, yesterday’s surprise has some logic and its critics exaggerate its importance, in our view. Here are a few reasons why. First, the question of whether this decision is read more

Thanks to Russia’s surprise intervention, Syria appears to have faded as a relevant source of risk in the short term. The new initiative was good and bad for President Obama, as it did save him from a difficult fight in congress, but it also left his credibility and leadership damaged. That blow to the credibility read more

Is the market over-reacting to every Fed official statement and subsequent clarification, or is the Fed behaving like a capricious teenager? Since the release of fed minutes on May 22nd that reflected a more emphatic debate about the reduction in the pace of asset purchases (i.e. tapering of LSAP), the market has had violent moves read more