Global Asset Markets Reflect A Major Demand Shock
- In recent weeks all major asset classes have moved in the classic “risk-off” direction. This is consistent with a contractionary demand shock in the global economy.
- Equities are down, Bonds are up, and Commodities are down.
- Credit spreads have widened, including sovereign bond spreads in the Euro area.
- In equities, cyclical stocks have been under performing, whilst typical defensive stocks have been doing relatively well.
- However, market data and economic indicators have not provided the necessary justification to explain such phenomena.
- The chart below provides a very good summary of the equity, bonds and commodity markets in recent months.