Displaying items by tag: fed

(New York)

One of the market’s favorite prognosticators has just called for a big financial crisis. Mark Mobius, 81, veteran investor, thinks that EMs are going to plunge, and that the normalization of interest rates and monetary policy will cause a crisis. “There’s no question we’ll see a financial crisis sooner or later because we must remember we’re coming off from a period of cheap money … There’s going to be a real squeeze for many of these companies that depended upon cheap money to keep on going”, says Mobius.

FINSUM: Emerging markets are currently having a rough time and the rise in rates is going to be turbulent, but calling for a Crisis seems a bit premature.

(New York)

Everyone is feeling it, but no one is sure when it might actually come. The big question is when will this bull market end and finally reverse into the bear market everyone fears. While a solid case could be made that it has already happened, Barron’s says it will be in 2020. The logic is that in 2020 the US will be facing genuinely higher rates, and the short-term benefits from tax cuts will have faded from earnings and the economy.

FINSUM: There is a serious argument to be made that the market may have already peaked, but the idea of a 2020 downturn sounds quite compelling too.

(New York)

Ten-year Treasuries are currently sitting at 2.85%, and according to Barron’s, they aren’t going anywhere. The reason why seems to be three part: a weak inflation outlook, trade war, and the combination of so-so growth and a hawkish Fed. All of this makes investors comfortable with sub-3% yields, and the bonds are being supported by their safe haven nature. Another problem is that US yields are much higher than in other developed countries, such as in Europe, keeping demand for Treasuries high.

FINSUM: We see longer end yields as pretty pinned at the moment. There is not much to be bullish about in the long term economic outlook, so it is hard to see why Treasuries would slide.

(New York)

Markets got hit with a double whammy yesterday. Escalating trade tensions absolutely nailed equities, but in a move that surprised some, US Treasuries did not gain. For essentially the last 30 years, whenever equity prices took a big hit, Treasury bonds tended to gain on their safe haven value. However, yields on the ten-year actually rose a point yesterday. The reason why appears to be the Fed’s very optimistic position on the US economy, which compels many to believe rates are headed higher, making Treasuries less appealing.

FINSUM: Markets, both stocks and bonds, are caught between a burgeoning trade war and a rate tightening cycle. Doesn’t sound very bullish.

(New York)

A big wave of buybacks is about to hit markets, and in an area where they haven’t showed up for a long time. The Federal Reserve is expected to give the green light to banks this week to rain buybacks down on investors. Furthermore, dividends are expected to grow considerably. Banks are expected to return 100% of their earnings over the next 12 months. JP Morgan is expected to hike dividends to 3%, and Citi looks poised to buy back 10% of its stock.

FINSUM: Goldman Sachs and Morgan Stanley might be the odd banks out in this forthcoming frenzy, but otherwise it should be very bullish for investors.