Every time an event causes a significant market move, like the recent ‘tapering’ discussion has done to international markets, the difficult question to answer is whether it is a transitory of a more permanent phenomenon. If the discussion is mostly noise, without a relevant impact on fundamentals, then it is bound to pass and making read more

April has so far been very volatile, as a result of the struggle between fundamentals showing incipient signs of a deceleration that brings fears of a now frequent seasonal pattern, and central bank liquidity on the other hand. Investors have grown fearful of every short-term correction, and the time of the year brings back memories read more

The European Union is back making mistakes and showing its best efforts at poor crisis management. There are many reasons why the decision to bail in bank depositors makes sense in the case of Cyprus. But the stability of the euro area is not one of them. It is not difficult to argue that Cyprus read more

Early enough in my career in research somebody told me I focused too much on how things should be as opposed to how things are likely to be. Clearly, when in the business of mapping reality to asset prices, what it should be is less relevant than what it is likely to be. For many read more

Last Thursday we learnt that dissent within the Fed is on the rise, which led markets to assign a higher probability to a withdrawal of monetary stimulus over the foreseeable future. On the fiscal side, the deal struck to avoid the fiscal cliff has postponed a significant portion of the negotiations. Thus, economic policy changes read more

The elections last night mean no real change with respect to the political deadlock that produced so much noise during the debt ceiling negotiations in 2011. The results from last night do not produce a material change to incentives, even though they can be interpreted as a message for ‘balance’ in the approach. Though we read more

Gradually two of the three main risks in the markets appear to have been moderated, while the third is quickly intensifying. The European Central Bank (ECB) has eliminated the tail-risk when it provided the conditions upon which it would put its balance sheet to help bailout Spain and Italy, if necessary. Economic data in China read more

A few days ago we underwent a reallocation of risk due to the increasing divergence between markets and real fundamentals. We are not secularly bearish, in part because it is difficult to see asset prices fall when faced with the wall of liquidity central banks are producing. But asset prices (equities in particularly) went from read more

Mario Draghi (ECB President) once again showed leadership at crisis management, when he announced the details of his plan to use the Central Bank’s balance sheet to help the euro and its troubled countries in their transition through structural reforms. Mario Draghi shows a rare and privileged combination of leadership and pragmatism. The size of read more

Over the last 3 years we have expressed skepticism about the crisis management skills of European policy makers. Recently we characterized the problem as one of pace and not substance. The basic ideas to save the euro are part of the policy debate, and politicians seem to understand the direction. But the politicians are always read more