Listen when markets speak

Apologies in advance; it’s been too long since my latest report, mainly because I think observing markets has been a bit like listening to a broken record. To re-cap; central banks—mainly the Fed and the ECB—made a dovish pivot at the start of the year in response to the swoon in Q4 18. Whether they meant this to be a relatively modest shift or not, investors ran with the story. Within a few months, markets were bullying Powell into rate cuts and by September, and pricing-in  rate cuts and QE by the ECB. In other words, the multiple-expanding support from a firm central bank put—perhaps even with a sprinkle of fiscal stimulus hopes—has reigned supreme in equities, and driven yields lower, even as fundamentals have deteriorated. Against this backdrop, the Fed and ECB have delivered, by and large, forcing markets to consider a shift in the Narrative™ that is now too persistent to ignore. I’d break it down into three separate themes. 

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