Investing

The yield on US 10-year Treasury bonds topped 2.8 percent on Tuesday, the highest point since 2018. The 10-year yield thus technically breaks the downward trend line that dominated the government bond market for the last four decades. “This is a harbinger of misery.”

While the Federal Reserve is expected to raise rates aggressively in the coming months, the European Central Bank, fearing the impact on Europe’s weaker economies, will remain reluctant to quickly boost Eurozone interest rates to mitigate the effects of rising prices. The ECB is due to provide a new monetary policy update on Thursday at its next six-week press conference.

When it comes to the prospect of a recession, and a possible prolonged period of stagflation, the jury is still out, even in Europe. Although in agreement on a deteriorating economic outlook, major asset managers such as BLI, Pictet and JP Morgan hold diverging views on what’s next. For investors, corporate earnings are now seen as the next waypoint.

During the brief period between the release of most Covid-19 measures and the start of the war in Ukraine, inflation was the order of the day. And although we currently live in a more complex and visibly less global world, inflation still seems to be the number one issue for financial markets.

The first quarter of 2022 was one of the toughest in decades for investors with a neutrally balanced portfolio, writes Bloomberg on the basis of its own data. The S&P 500 fell by 4.9 percent, US treasuries lost 5.6 percent and investment grade even fell by 7.8 percent. 

Japanese shares were hot in the 1980s, but the bubble has deflated mercilessly in the decades that followed. The high point that was reached in 1989 was never reached again. Especially funds in value shares seem to have fallen victim to the disinterest of investors in recent years. Now Japanese value stocks are hitting back.

Japanese value stocks in particular performed relatively well in 2021 and have continued to strengthen in the first two months of this year. The 1980s marked the heyday of the Japanese stock market.

Economic growth in the EU will be “severely affected” by the disruption triggered by Russia’s invasion of Ukraine, the European Commission has warned. Investor confidence in Germany, Europe’s largest economy, is falling sharply. The multiplicity of problematic macro factors is large and uncertainty about raw materials dominates. “In Europe it will be touch and go.”

Beyond the suffering and humanitarian crisis from Russia’s invasion of Ukraine, the entire global economy will feel the effects of slower growth and faster inflation, the International Monetary Fund said on Wednesday.

“We live in a more shock-prone world,” IMF Managing Director Kristalina Georgieva (pictured) recently said at a press briefing in Washington. “And we need the strength of the collective to deal with shocks to come.”

Financial markets do not always react in the same way to news. There are times when the stock market seems immune to both bad news and good news. Investors keep calm and make investment decisions based on fundamentals. The market works. At such times, it is relatively easy for analysts. They analyse the fundamentals, the market reacts.

European emerging-market bond funds pose limited contagion risk to the broader financial system in light of the conflict in Ukraine, rating agency Fitch said on Monday. The funds have low exposure to Russia, Ukraine and Belarus, which should limit the risk of a large increase in redemptions.