https://www.scmp.com/rss/327145/feed Kerry Craig, executive director, is a global market strategist at JP Morgan Asset Management, based in Melbourne. Prior to joining JP Morgan, he worked in the UK pensions industry and also held several economic research positions in the New Zealand government. Kerry holds a master’s degree in economics from the University of Auckland and is a CFA charterholder. en https://assets.i-scmp.com/static/img/icons/scmp-meta-1200x630.png https://www.scmp.com In the video game Mario Kart, players race around a track avoiding obstacles such as banana peels that would cause them to spin off and crash. As the US economy has been picking up speed, investors are wondering whether slippery banana peels could see the economy lose control, as well as what form these may take. The soft landing view of the US economy is increasingly becoming consensus as the resilience in data continued to build through the third quarter of the year. In fact, the Atlanta... https://www.scmp.com/comment/opinion/article/3237688/why-us-economys-soft-landing-hopes-could-easily-slip-recession?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3237688/why-us-economys-soft-landing-hopes-could-easily-slip-recession?utm_source=rss_feed Fri, 13 Oct 2023 09:30:08 +0000 Monetary policy is not the most exciting aspect of the economy, but it is a necessary one that garners a great deal of attention. Markets hang on central bankers’ every word and dissect what is – and often is not – said as they try to gauge where interest rates are heading in both the short and long term. As such, the annual central banker talkfest at Jackson Hole, Wyoming, was shaping up to be an important event for markets. The title of this year’s symposium – “Structural Shifts in the Global... https://www.scmp.com/comment/opinion/article/3233051/us-federal-reserve-still-seeking-interest-rate-sweet-spot-fall-inflation-slows?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3233051/us-federal-reserve-still-seeking-interest-rate-sweet-spot-fall-inflation-slows?utm_source=rss_feed Fri, 01 Sep 2023 14:30:13 +0000 The positive surprises on the growth and inflation outlook have created a Goldilocks tilt to markets, adding weight to the soft-landing scenario being reflected in rising equity indices. The resilience of the US and global economies in the face of sharply higher interest rates has illustrated just how far economies can bend without breaking. The activity data has hardly been robust, particularly from China and Europe, and does not suggest a re-acceleration in economic momentum, but the... https://www.scmp.com/comment/opinion/article/3228339/surprising-inflation-data-lends-weight-market-hopes-soft-economic-landing?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3228339/surprising-inflation-data-lends-weight-market-hopes-soft-economic-landing?utm_source=rss_feed Fri, 21 Jul 2023 08:30:12 +0000 US equities have moved back into bull market territory, surprising investors who are now asking whether the rally will last. The S&P 500 stands at 20 per cent higher than its most recent low in the middle of October 2022, suggesting that animal spirits are back and the rally will continue. Given that the US equity market is almost 9 per cent away from its high in January 2022, this is not an unreasonable assumption. However, not all equity sectors have benefited from the rally and rising... https://www.scmp.com/comment/opinion/article/3224203/why-latest-us-stock-market-bull-run-less-strong-it-seems?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3224203/why-latest-us-stock-market-bull-run-less-strong-it-seems?utm_source=rss_feed Fri, 16 Jun 2023 14:30:11 +0000 Shopping may well be a national pastime in the United States with household consumption making up around two-thirds of the gross domestic product. So far, consumers have failed to give any impression that the US could be heading for a recession and seem impervious to the drastically higher interest rates. But with financial conditions tighter and savings stockpiles being eroded, are US consumers finally starting to bend, and will they be pushed to breaking point? Americans’ propensity to consume... https://www.scmp.com/comment/opinion/article/3221000/us-economy-slowdown-consumption-may-not-be-only-recession-factor-watch?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3221000/us-economy-slowdown-consumption-may-not-be-only-recession-factor-watch?utm_source=rss_feed Fri, 19 May 2023 16:30:09 +0000 Read enough about currencies and you’ll come across the term “dollar smile”. When times are good and risk sentiment is high, the US dollar usually does well, as investors flock to the growth potential of US assets. Alternatively, when times are bad and investors are cautious, they seek out high-quality safe havens like US Treasuries, creating upward pressure on the US dollar. These are the two corners of the US dollar smile. When the outlook is mediocre, investors usually seek out investment... https://www.scmp.com/comment/opinion/article/3216918/us-dollar-smile-starting-fade-amid-economic-headwinds?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3216918/us-dollar-smile-starting-fade-amid-economic-headwinds?utm_source=rss_feed Fri, 14 Apr 2023 13:00:25 +0000 The shocks that have rippled across financial markets in the past few weeks have commanded almost the full attention of investors and market commentators, and rightly so. As the full impact of a year of successive and larger-than-normal interest rate increases from central banks establish themselves, the rates outlook will continue to dominate the financial market landscape and news headlines. But many other things have happened in the background that would have normally garnered attention.... https://www.scmp.com/comment/opinion/article/3214587/amid-market-turmoil-global-economy-not-doing-too-badly?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3214587/amid-market-turmoil-global-economy-not-doing-too-badly?utm_source=rss_feed Fri, 24 Mar 2023 13:30:19 +0000 The market view on where central banks will take interest rates next has whipsawed in the past week. Earlier this month, the market was pricing in the potential for the US Federal Reserve to take the cash rate to 6 per cent this year. However, the shock to the banking sector stemming from the collapse of Silicon Valley Bank (SVB) has led the market to instead price in interest rate cuts of 75 basis points by the end of the year. The uncertain outlook is complicating the investment landscape, but... https://www.scmp.com/comment/opinion/article/3213768/banking-shock-after-svb-collapse-complicates-federal-reserves-inflation-fight?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3213768/banking-shock-after-svb-collapse-complicates-federal-reserves-inflation-fight?utm_source=rss_feed Fri, 17 Mar 2023 17:00:12 +0000 The more pragmatic turn in economic policy from Chinese policymakers at the end of 2022 led to an abrupt shift in investor sentiment towards China and a sharp boost to the global economic outlook. More recently, a rise in geopolitical tensions with the United States has cast a shadow on the performance of equity markets, but the positive impact of a Chinese economy that is once again engaged with the world is hard to ignore in the near term. The longer-term focus on financial and economic... https://www.scmp.com/comment/opinion/article/3211234/china-will-focus-stabilising-economy-now-long-term-goals-wont-be-forgotten?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3211234/china-will-focus-stabilising-economy-now-long-term-goals-wont-be-forgotten?utm_source=rss_feed Fri, 24 Feb 2023 13:30:13 +0000 Inflation has peaked. The slowing pace of price increases across the world has dispelled many of the fears about a return to 1970s-style stagflation and supported both equity and bond market rebounds this year. Falling inflation is one thing, but a return to where central banks want it to be is another. This has changed the question for investors from, “how high will inflation go?” to, “how fast will it fall?”. In economic terms, the world is now going through a period of disinflation. This... https://www.scmp.com/comment/opinion/article/3208109/inflation-eases-how-will-central-banks-respond-interest-rates?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3208109/inflation-eases-how-will-central-banks-respond-interest-rates?utm_source=rss_feed Fri, 27 Jan 2023 14:00:15 +0000 Asian economies and markets faced an almost perfect storm in 2022. Aggressive interest rate increases by the US Federal Reserve and a rising US dollar created well-known headwinds to economic and market performance. Meanwhile, the energy crisis in Europe pushed up living costs and the sharp decline in Chinese economic activity because of Covid-19 restrictions added to the economic woes. The next year will bring its own challenges as the lagged impact of tighter monetary policy drags on global... https://www.scmp.com/comment/opinion/article/3203414/three-ways-2022s-perfect-storm-could-give-way-fair-winds-asian-economies?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3203414/three-ways-2022s-perfect-storm-could-give-way-fair-winds-asian-economies?utm_source=rss_feed Fri, 16 Dec 2022 07:30:10 +0000 The S&P 500 hit a low of 3,577 on October 12, a decline of about 25 per cent from its January peak. Since then, mixed corporate earnings and the potential softening in the pace of interest rate rises from the US Federal Reserve have lifted risk sentiment and the equity market has gained about 7 per cent. Investors are looking for the market trough and starting to wonder if it has already passed. However, multiple bear market rallies are not uncommon, and it could be too early to call the trough... https://www.scmp.com/comment/opinion/article/3199112/why-its-too-soon-say-if-us-stocks-have-hit-bottom?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3199112/why-its-too-soon-say-if-us-stocks-have-hit-bottom?utm_source=rss_feed Fri, 11 Nov 2022 14:00:16 +0000 The smaller rate increase from the Reserve Bank of Australia and more dovish tone left markets giddy that the peak in interest rates was fast approaching, and that other central banks – such as the US Federal Reserve – might follow in Australia’s footsteps and begin to reduce the size of their own rate increases. But what would it really take for this to happen? The short answer is jobs. The long answer is when the inflation rate is below the policy rate. The Fed has not stopped raising rates... https://www.scmp.com/comment/opinion/article/3195025/why-jobs-will-determine-when-us-fed-changes-its-interest-rate?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3195025/why-jobs-will-determine-when-us-fed-changes-its-interest-rate?utm_source=rss_feed Fri, 07 Oct 2022 14:00:09 +0000 The second half of the year has started very differently from the first. Bond yields are behaving themselves and equity markets are rising. Since the low on June 16, the S&P 500 has risen more than 15 per cent and unwound close to half of the peak-to-trough drop during the first half of 2022. The bear market rally is in full swing. Equity rallies during periods of overarching market weakness are not uncommon, and there can be multiple rallies even during a more prolonged downturn. Analysis by... https://www.scmp.com/comment/opinion/article/3189318/us-bear-market-rally-full-swing-how-long-will-it-last?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3189318/us-bear-market-rally-full-swing-how-long-will-it-last?utm_source=rss_feed Fri, 19 Aug 2022 03:30:26 +0000 Central banks around the world appear relentless in their fight to keep stubbornly high inflation from becoming embedded in their economies. This is most evident in the US, where an above-expectation June inflation report saw the market increase the probability of the Federal Reserve hiking rates by 100 basis points at its July meeting. This expectation has since receded, but the Fed’s actions are helping to raise the value of the US dollar, which creates headwinds elsewhere, mainly in emerging... https://www.scmp.com/comment/opinion/article/3186066/how-emerging-market-currencies-are-weathering-us-dollar-surge?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3186066/how-emerging-market-currencies-are-weathering-us-dollar-surge?utm_source=rss_feed Fri, 22 Jul 2022 04:15:25 +0000 The last few weeks have been a rough ride for investors as they hoped for a peak in inflation that proved not to be, and central banks acted to front-load further interest rate increases. The fallout for both equities and fixed income markets has been clear. The US equity market fell further into bear-market territory – down more than 20 per cent from its high in early January – and yields on government bonds rose. However, what is striking about all of the discussions around the market and... https://www.scmp.com/comment/opinion/article/3182769/federal-reserves-quantitative-tightening-plan-welcome-dose?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3182769/federal-reserves-quantitative-tightening-plan-welcome-dose?utm_source=rss_feed Fri, 24 Jun 2022 14:00:24 +0000 Fears are growing that the global economy is about to fall into a recession, having only recently recovered from the last one. There are plenty of reasons to justify the worries. The energy crisis in Europe, the rising cost of living, the global fallout from China’s Covid-19 restrictions and the potential for central bank errors in overtightening policy all present threats to the growth outlook. The real risk, though, is not to the global economy or regional economies, though the euro zone will... https://www.scmp.com/comment/opinion/article/3179257/can-we-avoid-global-recession-largely-depends-us?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3179257/can-we-avoid-global-recession-largely-depends-us?utm_source=rss_feed Fri, 27 May 2022 19:30:21 +0000 The market’s shifts between risk-on and risk-off environments have been abrupt this year. The growing chorus of central bank hawks in the United States and Europe are rattling investors, as they digest the effects of potential policy errors on equity markets and the economy. Meanwhile, the possibility of extended lockdowns across eastern Chinese cities and negative sentiment about the country’s economic outlook have spilled over into developed markets, given the potential impact on global... https://www.scmp.com/comment/opinion/article/3175825/us-treasuries-japanese-yen-gold-are-any-still-safe-havens?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3175825/us-treasuries-japanese-yen-gold-are-any-still-safe-havens?utm_source=rss_feed Fri, 29 Apr 2022 04:30:27 +0000 This year has already given investors a lot to contend with and we’re not even at the end of the first quarter. With rising rates, surging inflation and stratospheric increases in commodity prices, it may take some time before investors have more clarity on markets and the longer-term implications of the events of the past few weeks. However, when the clouds do lift, some familiar themes are likely to re-emerge. One of the most persistent is: where can I find income? The excessive levels of... https://www.scmp.com/comment/opinion/article/3171672/why-investors-seeking-refuge-inflation-policy-tightening-may-look?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3171672/why-investors-seeking-refuge-inflation-policy-tightening-may-look?utm_source=rss_feed Fri, 25 Mar 2022 05:30:25 +0000 Capital markets have had a turbulent start to the new year as they adjust to more active central banks and tighter monetary policy. The US Federal Reserve has kick-started the hawkish tones, and other developed market central banks are following suit. Higher interest rates are not a negative given they signal a stronger economy, but the pace of increases could be if rates move higher in quick succession. It turns out the only thing transitory about inflation in the United States was the use of... https://www.scmp.com/comment/opinion/article/3165808/why-federal-reserves-hard-pivot-over-inflation-has-stock-markets?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3165808/why-federal-reserves-hard-pivot-over-inflation-has-stock-markets?utm_source=rss_feed Fri, 04 Feb 2022 14:15:12 +0000 Markets started the year with a head of steam as bond yields rallied and prices fell. The surge in bond yields had a knock-on effect on equity markets as investors migrated from growth stocks to value stocks. While it may seem that the year has started with gusto, markets are really just picking up where they left off at the end of last year, when the discussion on when and how the US Federal Reserve would raise interest rates was the dominant theme. Even the rise of the Omicron variant hasn’t... https://www.scmp.com/comment/opinion/article/3163243/what-expect-year-policy-tightening-and-us-interest-rate-rises?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3163243/what-expect-year-policy-tightening-and-us-interest-rate-rises?utm_source=rss_feed Fri, 14 Jan 2022 06:30:18 +0000 Up until two weeks ago, the biggest fear for markets was runaway inflation and how aggressive central banks may become in containing it. However, news of a new Covid-19 variant has cast a shadow over economic growth, and is posing a bigger risk to global economic recovery. But the trend is still for central banks, and particularly the US Federal Reserve, to continue to ease off the monetary accelerator. The growing chorus of Fed Reserve committee members calling for a faster interest rate... https://www.scmp.com/comment/opinion/article/3158179/federal-reserve-hawks-will-push-faster-tapering-interest-rate-rises?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3158179/federal-reserve-hawks-will-push-faster-tapering-interest-rate-rises?utm_source=rss_feed Fri, 03 Dec 2021 08:30:09 +0000 Gold is one of the world’s oldest financial assets and often seen as a safe harbour when capital markets get choppy. It is considered a hedge against rising inflation and a store of value in the face of economic calamity. In 2020, gold prices soared to an all-time high as the world was turned upside down by the Covid-19 pandemic and investors sought protection from falling equity markets. Despite the increasing voices warning about the threat of inflation from disrupted supply chains and... https://www.scmp.com/comment/opinion/article/3154798/no-gold-rush-are-investors-really-worried-about-inflation-and?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3154798/no-gold-rush-are-investors-really-worried-about-inflation-and?utm_source=rss_feed Fri, 05 Nov 2021 06:30:23 +0000 The transitory nature of inflation has been tested recently amid expectations of an increase in prices, which is pushing up bond yields. Rising yields are having knock-on effects on equity markets as higher valuations become harder to justify. Rising prices also create headwinds to economic growth as they can squeeze household purchasing power and depress consumer confidence. Inflation is likely to remain elevated in the near term for a variety of reasons but whether it proves transitory will... https://www.scmp.com/comment/opinion/world/article/3150733/transitory-inflation-depends-how-quickly-central-bankers-act?utm_source=rss_feed https://www.scmp.com/comment/opinion/world/article/3150733/transitory-inflation-depends-how-quickly-central-bankers-act?utm_source=rss_feed Fri, 01 Oct 2021 06:30:29 +0000 The unexpected provokes the strongest reactions. Markets are no different. Pieces of news that change commonly held expectations tend to set money in motion. For example, a very poor economic data point could be shrugged off by the markets if it was expected and already reflected in prices. It’s the change in expectations relative to consensus that really matters. A recent case in point is the price of bonds, which have been edging higher, and yields lower (yields move inversely with prices)... https://www.scmp.com/comment/opinion/article/3145607/china-and-us-economic-recovery-takes-disappointing-turn?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3145607/china-and-us-economic-recovery-takes-disappointing-turn?utm_source=rss_feed Fri, 20 Aug 2021 17:30:18 +0000 There is a popular theory among investors that bond markets are sensitive barometers – moves in government bonds are a gauge of market sentiment. The wise bond market is supposed to be rational but, lately, it has sent some perplexing signals. Bond yields have fallen in the past few weeks, which means bond prices have risen, as they move inversely. The steady increase in demand for bonds created confusion for markets as it suggested that investors were buying safe assets like US Treasury bonds... https://www.scmp.com/comment/opinion/article/3142106/why-are-bond-yields-so-low-when-economic-recovery-indicators-are?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3142106/why-are-bond-yields-so-low-when-economic-recovery-indicators-are?utm_source=rss_feed Fri, 23 Jul 2021 06:30:14 +0000 Inflation is the enemy of the bond investor. Rising prices erode the purchasing power of the fixed coupon payments earned from holding corporate or government debt. In theory, when inflation goes up, the price of bonds falls and the yields on those bonds rise. However, what is happening now is somewhat perplexing as bond yields have been falling even as inflation is rising. Is the bond market actually broken? In the midst of the pandemic, central banks stepped into the government and corporate... https://www.scmp.com/comment/opinion/article/3137636/flagging-yields-amid-rising-inflation-raise-fears-bond-market?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3137636/flagging-yields-amid-rising-inflation-raise-fears-bond-market?utm_source=rss_feed Fri, 18 Jun 2021 06:30:00 +0000 Since becoming US president, Joe Biden has announced an eye-watering US$6 trillion in proposed fiscal spending. First was the US$1.9 trillion American Rescue Plan in January. All those US$1,400 stimulus cheques are still reverberating through the economy as consumers unleash pent-up spending power. In the past two months, there have been two further very large proposals: the American Jobs Plan (US$2.3 trillion), focused on rebuilding much of the country’s ageing infrastructure, and the more... https://www.scmp.com/comment/opinion/article/3132433/how-will-bidens-stimulus-packages-higher-taxes-affect-stock-markets?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3132433/how-will-bidens-stimulus-packages-higher-taxes-affect-stock-markets?utm_source=rss_feed Fri, 07 May 2021 19:30:14 +0000 The last decade was all about “American exceptionalism”, characterised by the relentless outperformance of the US economy and its financial markets beating the returns of almost anywhere else. However, this leadership was supposed to finally be fading heading into 2021 as the forces responsible for a long-term US economic slowdown finally caught up to it and its exceptionalism started to draw to a close. Importantly, this was meant to lead to a decline in the US dollar as investors positioned... https://www.scmp.com/comment/opinion/article/3128740/coronavirus-recovery-why-us-dollars-puzzling-strength-only?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3128740/coronavirus-recovery-why-us-dollars-puzzling-strength-only?utm_source=rss_feed Fri, 09 Apr 2021 14:00:09 +0000 The US Federal Reserve met this week to decide on interest rates and policy projections. The meeting had been hotly anticipated, as it was expected to set the tone for the central bank’s policy response to rising bond yields (bond yields move inversely to prices).  As it turned out, there was little to see – the Fed kept the song the same. Committee members remain in harmony on interest rate hikes. The question now for markets is: how credible is this outlook when the US economy will be... https://www.scmp.com/comment/opinion/article/3125922/fed-may-be-tune-will-inflation-eventually-spoil-party?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3125922/fed-may-be-tune-will-inflation-eventually-spoil-party?utm_source=rss_feed Fri, 19 Mar 2021 17:30:09 +0000 The market marches on. After some jitters caused by retail investors swarming around heavily shorted stocks, global equities have again found themselves on firmer ground. However, the regained market composure has not put to rest lingering questions about whether the market had got ahead of itself and priced in too much positivity. These worries are touching nerves because of the unusual nature of the recession and the economic recovery. The disparity between the market and the economy is clear:... https://www.scmp.com/comment/opinion/article/3122090/stock-markets-are-likely-continue-climbing-given-unexpectedly-good?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3122090/stock-markets-are-likely-continue-climbing-given-unexpectedly-good?utm_source=rss_feed Fri, 19 Feb 2021 07:45:10 +0000 The prevailing mood in the markets is cautious optimism, with a near-universal expectation of economic rebound on the horizon. Much less agreed on, in fact quite hotly debated, are the dangers that may lurk from inflation. High inflation, or even just moderately higher inflation at the wrong time, could upset investor sentiment and drag down equity and credit markets. Inflation, or rising prices in the economy, matters because it is reflected in both the price and yield of government bonds, the... https://www.scmp.com/comment/opinion/article/3116660/inflation-fears-are-not-unfounded-nightmare-scenario-unlikely?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3116660/inflation-fears-are-not-unfounded-nightmare-scenario-unlikely?utm_source=rss_feed Fri, 08 Jan 2021 11:15:07 +0000 Credit markets tend to perform well at the beginning of economic cycles, when businesses are growing, earnings prospects are rising and the tide of bad debts from the last cycle have been cleared. The good performance of corporate bonds globally in November serves as proof of this trend. Meanwhile, China seems to again be marching to the beat of a different drum. Going against the global trend, we have seen a sharp sell-off in Chinese onshore corporate bonds after a spike in defaults caused... https://www.scmp.com/comment/opinion/article/3112418/bond-defaults-will-force-needed-repricing-risk-chinas-credit-market?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3112418/bond-defaults-will-force-needed-repricing-risk-chinas-credit-market?utm_source=rss_feed Fri, 04 Dec 2020 07:15:12 +0000 Bond investors are feeling blue these days. Bonds are supposed to provide a stable income and offset the volatility of buying stocks. But the crushing of global interest rates to zero has sapped bond yields, eroding their appeal. Put another way, fixed-income assets are providing little to no income. Unfortunately, it seems pretty unlikely that the income payout on bonds is going to rise any time soon. Governments around the world are determined to nurse economies recovering from Covid-19 back... https://www.scmp.com/comment/opinion/article/3106637/bond-investors-chasing-yield-should-look-further-afield-shake-blues?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3106637/bond-investors-chasing-yield-should-look-further-afield-shake-blues?utm_source=rss_feed Fri, 23 Oct 2020 07:15:11 +0000 Central banks have been both the heroes and villains of capital markets. Their actions have helped to support a V-shaped recovery in risk assets while further punishing income-seekers. As markets start to fret about another wave of Covid-19 cases across Europe and the economic implications of renewed restrictions, they should perhaps be more concerned with the tsunami of liquidity that has squashed yields and the prospects for further easing of monetary policy in developed markets, thus... https://www.scmp.com/comment/article/3102983/chinas-bond-market-potential-hero-investors-seeking-yields?utm_source=rss_feed https://www.scmp.com/comment/article/3102983/chinas-bond-market-potential-hero-investors-seeking-yields?utm_source=rss_feed Fri, 25 Sep 2020 09:00:08 +0000 Seemingly defying the Covid-19-fuelled economic recession battering the US, the S&P 500 reached a new high for the year on August 18, despite historic job losses and shrinking corporate profits. So, what does the latest round of earnings announcements tell us about the future of the US equity market? Heading into this earnings season, expectations were low. The consensus was for a 45 per cent year-on-year decline in earnings, with limited corporate guidance as companies were essentially flying... https://www.scmp.com/comment/opinion/article/3098148/earnings-season-low-expectations-keep-us-stock-market-flying-high?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3098148/earnings-season-low-expectations-keep-us-stock-market-flying-high?utm_source=rss_feed Fri, 21 Aug 2020 12:45:12 +0000 A new economic and market cycle has begun as the world tries to rebound from the short-lived but brutal Covid-19 recession. However, this is no ordinary recovery. Pent-up demand and a desire for expansion are at odds with the scary possibility of a virus resurgence, something we are sadly seeing in the US as cases there spike in many states. That makes for wildly disparate predictions for a post-coronavirus world. To gain some clarity on what lies ahead, we can start by assessing the... https://www.scmp.com/comment/opinion/article/3091541/economies-revving-recovery-coronavirus-should-expect-many-detours?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3091541/economies-revving-recovery-coronavirus-should-expect-many-detours?utm_source=rss_feed Fri, 03 Jul 2020 13:00:14 +0000 A wave of optimism has washed over global equity markets in the past few weeks as investors cling to supportive policies and the easing of lockdown measures around the world. The benchmark S&P 500 equity index was recently back in the black, briefly, for the year. It wasn’t quite a return to its February peak, but a remarkable achievement nevertheless, given the economic impact of the coronavirus pandemic and a highly charged political environment. Meanwhile, European equity indices are still 10... https://www.scmp.com/comment/opinion/article/3088438/are-european-stocks-next-big-opportunity-economic-recovery-takes?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3088438/are-european-stocks-next-big-opportunity-economic-recovery-takes?utm_source=rss_feed Fri, 12 Jun 2020 12:00:15 +0000 Equity markets around the world have rallied sharply since the March low. The S&P 500 bounced back strongly and quickly; by the end of last week, it had regathered over half of the fall from its peak in February. The pace of the rebound in markets is as remarkable as the head-snapping velocity of the decline. Some investors may be getting that familiar feeling of being left on the sidelines. It’s like being overtaken by a speeding driver in a flashy car on the highway – I might briefly envy... https://www.scmp.com/comment/opinion/article/3083278/us-stocks-have-bucked-coronavirus-downturn-will-corporate-earnings?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3083278/us-stocks-have-bucked-coronavirus-downturn-will-corporate-earnings?utm_source=rss_feed Fri, 08 May 2020 12:00:12 +0000 It has been understandably overshadowed by the coronavirus crisis, but the oil market has had a few wildly dramatic weeks. There have been more plot twists than in a soap opera, but with real-world consequences. As a result of these machinations, the oil market now faces a perfect storm of a sudden collapse in global demand and rising supply. The month-long all-out price war caused prices to plummet to levels not seen since the great financial crisis. But this is not the first battle in the long... https://www.scmp.com/comment/opinion/article/3079257/will-saudi-russia-deal-end-oil-price-war-be-enough-coronavirus?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3079257/will-saudi-russia-deal-end-oil-price-war-be-enough-coronavirus?utm_source=rss_feed Fri, 10 Apr 2020 06:00:16 +0000 As a kid, the fun thing about bubbles was how big you could make them before a very satisfying “pop”. For investors, bubbles aren’t nearly so much fun, especially if they create a mess when they burst. Neither is there much chance of spotting one before it actually pops. Before this week, many equity markets had recently touched record highs. Meanwhile, bond yields are hitting record lows. This has increased speculation that some asset classes are looking bubbly. Developed-market government... https://www.scmp.com/comment/opinion/article/3052602/falling-bond-yields-may-be-less-sign-bubble-reflection-long-term?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3052602/falling-bond-yields-may-be-less-sign-bubble-reflection-long-term?utm_source=rss_feed Fri, 28 Feb 2020 16:30:16 +0000 Global equities have started the year on a high, supported by a clearer economic outlook following the signing of the phase one US-China trade deal. Indeed, many economic forecasts point to better global growth in 2020 than last year. Just this week, the International Monetary Fund released its own projections showing the global economy would expand 3.3 per cent in 2020, compared to 2.9 per cent in 2019. This improved outlook is set against a backdrop of loose policy by central banks and the... https://www.scmp.com/comment/opinion/article/3047364/federal-reserve-smiling-them-equity-markets-should-have-good-year?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3047364/federal-reserve-smiling-them-equity-markets-should-have-good-year?utm_source=rss_feed Fri, 24 Jan 2020 17:00:13 +0000 A plant’s ability to thrive in harsh conditions is remarkable. Sometimes, even the most withered leaves can spring back to life with a little water. Similarly, despite a sometimes forbidding climate, the global economy has shown hardy long-term resilience. In recent weeks, much has been made of the green shoots of growth starting to appear. However, as promising as they may be, the shoots are just budding – it wouldn’t take much to see them wilt – so expectations of a massive upswing in global... https://www.scmp.com/comment/opinion/article/3042746/us-china-trade-tension-relief-has-helped-nurture-green-shoots?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3042746/us-china-trade-tension-relief-has-helped-nurture-green-shoots?utm_source=rss_feed Fri, 20 Dec 2019 17:00:09 +0000 A shift in market sentiment is under way. Until recently investors were crowding into defensive assets and paying high prices for safe havens like government bonds. Today the winds are turning in favour of the so-called reflation trade as signs of a brighter outlook bolster optimism. The trade occurs when investors take the more upbeat view and turn away from safe assets and towards cyclical assets and parts of the equity market that would respond favourably to an economic tailwind. With... https://www.scmp.com/comment/opinion/article/3037637/even-expected-us-china-trade-deal-boosts-appetite-riskier-assets?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3037637/even-expected-us-china-trade-deal-boosts-appetite-riskier-assets?utm_source=rss_feed Fri, 15 Nov 2019 19:00:13 +0000 As we enter the last quarter of the year, investors are beginning to speculate on whether equity markets will enjoy a lift into the end of the year. Bond yields and equities are indeed rising, and investors are starting to worry less about the risks to the market and the economic outlook, nearly all of which are political. So, what is behind this lift in market spirits? For a start, political risk has been alleviated. The phase-one trade deal between the US and China was welcomed by markets,... https://www.scmp.com/comment/opinion/article/3034241/markets-lifted-us-china-trade-and-brexit-breakthroughs-deep?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3034241/markets-lifted-us-china-trade-and-brexit-breakthroughs-deep?utm_source=rss_feed Fri, 25 Oct 2019 15:00:05 +0000 When it comes to financial markets, dull is normally a good thing. Being dull is predictable, safe and usually reliable. Cash is about as dull as it gets, or at least it should be.  That’s exactly why sudden mayhem in a sleepy, obscure corner of the overnight lending markets in the US has recently sparked headlines. A chaotic surge in short-term lending rates signalled that capital markets’ plumbing had clogged up, prompting questions about whether this was a symptom of a more serious problem... https://www.scmp.com/comment/opinion/article/3030468/sudden-shift-normally-calm-us-cash-markets-doesnt-signal-new-credit?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3030468/sudden-shift-normally-calm-us-cash-markets-doesnt-signal-new-credit?utm_source=rss_feed Fri, 27 Sep 2019 07:00:10 +0000 Out driving the other day, an orange warning light appeared on the dashboard. My first thought was not that the engine was about to burst into flames, nor did I abruptly pull over. I continued driving towards where I was going and then I drove home again.  My calmness was due to the realisation that warning lights themselves are not a sign that something bad has happened – smoke from the engine would be in this case – but that something bad may happen. The bond market is the same. The global... https://www.scmp.com/comment/opinion/article/3022924/bond-market-flashing-recession-warning-thats-no-cause-alarm-yet?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3022924/bond-market-flashing-recession-warning-thats-no-cause-alarm-yet?utm_source=rss_feed Fri, 16 Aug 2019 05:00:07 +0000 Taking a look at the world and capital markets through the widest macroscopic lens is a sensible way of determining what matters when it comes to investing. However, now and again the micro-narrative takes over, and the corporate earnings season is one of those times. The current macroeconomic backdrop is uninspiring but understandable. The trade war has dented corporate activity and economic sentiment, but central banks have signalled their intent to ease rates to steady the economic ship. The... https://www.scmp.com/comment/opinion/article/3019162/trade-war-lull-good-time-assess-damage-and-corporate-earnings-give?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3019162/trade-war-lull-good-time-assess-damage-and-corporate-earnings-give?utm_source=rss_feed Fri, 19 Jul 2019 19:00:06 +0000 US equity markets are on track to post very strong gains over the month of June, a steep contrast to their performance in May, which was the worst since 2010. The swing can largely be attributed to the “Powell Put”. This is a reference to both the chair of the US Federal Reserve, Jerome Powell, and a position used in the options market, the put, which gives the holder of that option the right to sell should the underlying price of the asset fall too far. In the context of Powell, the put is some... https://www.scmp.com/comment/opinion/article/3016190/fed-easing-can-give-equity-markets-boost-it-wont-keep-them-aloft?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3016190/fed-easing-can-give-equity-markets-boost-it-wont-keep-them-aloft?utm_source=rss_feed Fri, 28 Jun 2019 13:00:08 +0000 Earlier this year, IBM unveiled the first ever commercial quantum computer. In quantum processing, unlike the binary code programming of older computers, something can exist as a 0 or a 1 and everything in between, all at the same time. That’s akin to Schrödinger's cat, which in the famous thought experiment would be both dead and alive if quantum theory were applied. It was meant to show that simple misinterpretations of theory can lead to absurd results which do not match the real... https://www.scmp.com/comment/opinion/article/3013441/global-economy-thriving-diving-or-both-perhaps-quantum-theory-can?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3013441/global-economy-thriving-diving-or-both-perhaps-quantum-theory-can?utm_source=rss_feed Fri, 07 Jun 2019 06:00:10 +0000