“Add cash” – When even market makers recommend to take some risk off the table

walking on a rope

“Central banks are unleashing easy money to fight an imaginary villain, consumer price deflation, at the risk of feeding a real monster, asset price inflation,” Head of emerging markets and global macro at Morgan Stanley Ruchir Sharma said.

Mr Sharma believes that asset price inflation is as dangerous as consumer price inflation, and the Fed should take responsibility for both. In an op-ed published by the Wall Street Journal, Mr Sharma commented that we are living one of the longest US rallies in history and investment decisions seem guided by the availability of liquidity, not opportunity.

Mint partners’ Bill Blain argues that we are not going to see a massive increase in rates, at least in the short term.

 “Even if we see global central banks starting to hike, it’s been pushed much further down the road than we originally expected. What we are going to see is global growth re-established, inflation coming back in and that means that rates in the bonds market will rise,” he commented for Bloomberg.

JP Morgan strategists recommend to reduce risk to some extent.

“We feel OK with our long-standing strategy to overweight riskier assets, but have become increasingly worried about the more medium-term prospects, forcing to take some risk off the table. In our monthly GMOS from two days ago, we brought Cash to Neutral, having been Underweight for most of the past six years,” said the investment bank’s Global Asset Allocation Report on May 8th.





About the Author

Ana Fuentes
Columnist for El País and a contributor to SER (Sociedad Española de Radiodifusión), was the first editor-in-chief of The Corner. Currently based in Madrid, she has been a correspondent in New York, Beijing and Paris for several international media outlets such as Prisa Radio, Radio Netherlands or CNN en español. Ana holds a degree in Journalism from the Complutense University in Madrid and the Sorbonne University in Paris, and a Master's in Journalism from Spanish newspaper El País.

2 Comments on "“Add cash” – When even market makers recommend to take some risk off the table"

  1. Roberto Vazquez Platero | 19th May 2015 at 6:25 pm |

    Estimada Ana, la felicito por su publicación respecto al artículo de Ruchir Sharma. Hace años que sigo los artículos de RS y simplemente creo que sus puntos de vista son más válidos que los de muchos premios nobel de economía.
    La suba en los precios de los commodities se explica por las políticas de Alan Greenspan en reacción al riesgo de deflación después de la crisis de las dot com. Sin embargo hay cientos de artículos sobre el tema que ignoran el impacto de bajas tasas de interés y flujos de capital hacia países emergentes, crecimiento sincronizado de estos y aumento artificial del comercio recíproco. Nadie previó el aumento y nadie previó la caída de precios de las commodities mejor que RS. Cuando exploten las burbujas de “asset prices” en el mundo emergente veremos el verdadero monstruo a que se se refiere RS.
    Roberto Vazquez Platero (Uruguay)

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