Opinion

UK financial markets are in «turmoil». This somewhat CNBC-esque opening, however, covers it well. And it has resulted in a chart that usually belongs to an emerging economy on the verge of collapse. The British pound is falling despite rapidly rising interest rates.

After consistently recording fat pluses over the past decade, the euro area’s trade balance has sunk deep into the red. For years, international trade contributed substantially to economic growth in the euro area. But: “Das war einmal”.

A historic surge in expensive energy imports now that gas supplies from Russia have been completely cut off results in a heavily negative trade balance. As a result, trade is now dragging down growth and pushing up the already sky-high risk of recession further.

This will probably be the worst but also the best year for bonds ever. Rising interest rates and credit spreads are causing hefty price losses. Inflation is a bond investor’s worst enemy and it is skyrocketing. The fact that interest rates and credit spreads are rising fast is good for bond investors in the long run. Panic and volatility always create opportunities.

Activity in the US housing market is rapidly declining. New home sales fell more than 12 per cent in July, the biggest drop since February last year. It was also the sixth decline in seven months. Compared to the peak, 51 per cent fewer new homes were sold.

L’inflation plus élevée que prévu a surpris de nombreux investisseurs. La baisse des prix du pétrole et des métaux industriels les a trompés. L’attention des investisseurs, qui s’est principalement concentrée sur l’inflation globale, leur a fait oublier l’évolution de l’inflation sous-jacente.

Celle-ci retire du panier des prix les éléments volatils tels que l’énergie et l’alimentation. Mais pour la banque centrale, cette inflation sous-jacente est beaucoup plus importante. 

Economic insecurities on a broad scale are increasingly impacting the decision making of institutional investors. With continuously high volatilities in equities and, as an effect of rising interest rates, even in the bond markets, they look at illiquid assets, or Alternative Investments that can offer solid cash flows and long-term returns.

In retrospect, we can say that central banks used the annual Jackson Hole symposium to revive their credibility as inflation fighters. This also applies to the ECB.

After yet another higher-than-expected inflation rate - we are now at 9.1 percent - and core inflation at a new record of 4.3 per cent, the ECB Governing Council on Thursday has adopted a record interest rate hike of 75 basis points.

Ces dernières semaines, le nouveau documentaire de la VRT, FIRE, a fait couler beaucoup d’encre. Le programme télévisé présentait différentes personnes qui promettaient/assuraient qu’on pouvait devenir riche en suivant leur mode de vie et d’investissement.

With China using interest rates again to defuse the property crisis, and the Federal Reserve making clear in Jackson Hole that it will continue to tighten, the divergence in central bank policy between the two largest economies is increasing. This is not good news for the yuan, emerging market currencies and equities.

Low-risk stocks do better in the long run than high-risk stocks. For the record, this story equates risk with movement or, in stock market jargon, volatility. In itself, this is not the correct definition of risk. The flip side of risk in the form of volatility is opportunity.