A primary focus for global financial markets in Q4 2018 was the growing fear that the FED has tightened monetary policy too far, too fast and risks tipping the US economy into recession. This culminated in a severe global equity sell-off, which accelerated after the December FED meeting.
Following last week’s meeting of the US Federal Reserve (FED), markets have become increasingly concerned that the FED is making a policy mistake in continuing to increase interest rates.
The China economic slowdown story had been building behind the scenes long before markets decided to focus on trade hostilities with the US.
Tom Piotrowski speaks with Ardea IM’s Gopi Karunakaran regarding rising US interest rates, the outlook for Australian interest rates and the ActiveX Ardea Real Outcome Bond Fund (Managed Fund) (XARO).
Recently in the AFR, Tamar Hamlyn discusses how the past weeks and months have seen financial markets approaching the year-end period with decidedly less lustre than investors might like.
Even if you have no exposure to fixed income, interest rates still matter … a lot.
The cross currency basis arises when pricing in the foreign exchange market diverges from what interest rate differentials would imply. This divergence creates a small additional return above the domestic interest rate.
The carrot that alternative investment strategies often dangle in front of investors is the prospect of uncorrelated returns.
Conventional portfolio construction assumes that governments bonds will diversify equity risk. The theory is that when equities fall, bond yields decline, resulting in capital gains on bonds that help offset equity losses. The problem is that it’s not working that way in practice.
During the early stages of the reach for yield process, credit market exposure was the wise choice. Now that we’re closer to the end, it’s more questionable.
