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.

Global Asset Markets Reflect A Major Demand Shock

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