LONDON | Barclays analysts | The global recovery remained modest in 2013, inflation was somewhat lower than expected, and monetary policy in the developed countries became even more supportive. While these fundamentals would normally suggest that bonds would outperform stocks, the opposite occurred, and in a very big way: bond prices plunged and equity prices soared.
Via Credit Suisse | Following the global financial crisis, major central banks have taken unprecedented policy actions in a bid to support the global economy and address short-term financial risks. In the following video, thought leaders from the Credit Suisse Research Institute discuss the use of these actions to attack crises, as well as the challenges associated with exiting these unconventional instruments in the coming years. [NOTE: The views expressed in this video are the interviewees’ own and do not necessarily reflect The Corner’s editorial policy].
MADRID | By Francisco López | The U.S. latest unemployment data, as well as the gold price collapse and the movements of the sovereign suggest the beginning of the gradual withdrawal of the assets purchase by the Federal Reserve may be imminent. However, stock markets are not just quite sure the Fed will decide to start tapering at its last meeting of the year, since some macro indicators show the recovery of the first economy of the planet is not strong enough.
LONDON | By Barclays analysts | A new equilibrium has emerged where the Fed has managed to anchor front end rates via rates guidance while preparing markets for tapering. This environment remains risk friendly, but its stability is vulnerable to the speed of the recovery.
SAO PAULO | By Benjamin Cole at Marcus Nunes’ Historinhas | It is an old trick question: What state has not one but two of the 12 regional banks of the United States Federal Reserve System? Is it New York state, the nation’s financial, commercial and manufacturing powerhouse when the Fed was founded in 1913? Answer: Missouri.
LONDON | By Jim McCormick at Barclays | Let’s explore how the start of Fed policy withdrawal will affect asset allocation. From Braclays, we do not see an early start to Fed tapering being especially disruptive for broader risk assets, and we’d expect US equity markets to be more vulnerable than most other risk assets.
LONDON | By Michael Pond and Chirag Mirani at Barclays | Some at the Fed believe that a higher inflation target could be a good strategy, though one that is difficult to communicate. Instead, in our view, it has an implicit near-term tolerance for above-target inflation; forward breakevens should be higher as a result.
By Benjamin Cole at Marcus Nunes’ Historinhas | Recently Federal Reserve Bank President Charles Plosser opined that even periods of mild deflation could be welcome in the United States, and that Fed should have but a lone goal, and ideally that is zero inflation.
MADRID | By Julia Pastor | The Fed and the ECB launched their unconventional monetary policies starting from different positions as their economies’ financial structures are not the same. Also their forward guidance diverged, but both central banks tried to boost the real economy and were effective. The uncertainties about the future would revisit those similarities and contrasts.
NEW YORK | By Ana Fuentes | Thursday was Janet Yellen’s big day. In front of the Senate Banking Committee she ran through her prepared speech (released by the Fed on Wednesday) and acknowledged “the risks” of injecting QE steroids to the U.S. economy for too long. However, she argued, inflation is still too low and unemployment rate, too high. “The benefits exceed the costs” of the Fed’s current policies, she said. Will we see any tapering soon? Certainly, but not yet.