Bond Markets Are Underestimating the Fed Goldman and Pimco Warn
(MENAFN- ProactiveInvestors - UK) Fuller Treacy Money Fri
Bond Markets Are Underestimating the Fed Goldman and Pimco Warn
Here is the opening of this interesting report from Bloomberg:
Goldman Sachs Group Inc. and Pacific Investment Management Co. say bonds are poised to fall and traders aren't prepared for how far the Federal Reserve will raise interest rates.
'Ten-year yields are likely to go up' Jan Hatzius chief economist for Goldman Sachs said at a conference in Sydney. The 'bond market is underestimating to a significant degree the amount of monetary normalization that we're likely to see.' The benchmark yield will rise to about 3 percent by year-end he said from 1.91 percent Thursday.
Global economic growth will subdue deflation fears and the Fed will raise rates more than traders expect according to Pimco which manages the world's biggest actively run bond fund. The company has a 'small underweight' position in global bonds according to a report Wednesday by Mihir P. Worah and Geraldine Sundstrom fund managers at the Newport Beach California firm.
The two bond powerhouses are voicing the consensus outlook among economists surveyed by Bloomberg which projects yields will rise through the course of 2016. The bearish view is reemerging after being drowned out in January as tumbling oil and stock prices sent investors rushing to the haven of government debt.
David Fuller's view
The Fed would love to be in a position finally and sensibly to normalise monetary policy. This would be confirmation that Janet Yellen and even more importantly Ben Bernanke before her had made the right decisions with their radical monetary policies.
However the Fed is not operating in a vacuum.
Browning World Climate Bulletin
My thanks to Alex Seagle for the February issue of this fascinating publication which remains of interest to many subscribers. Here is a brief sample:
Investmentsa' While Browning Media does not offer investment advice we do recognize that there are opportunities when sweeping global agreements are made. It should once again be noted that for the next 15 years the type of climate that has created more extreme storms billion-dollar insurance losses multi-year droughts and record breaking temperatures will persist. We as a culture will likely adapt but much of that adaptation will be structured by the actions taken during conferences such as the Paris Summit.
Eventually our climate will naturally improve. Until then we have 15 more years that will continue to fuel the belief of man's impact on climate. As such there is close to two trillion dollars' worth of investment capital and opportunity for any and all 'environmentally-friendly' services products and technologies. There are the opportunities in developed countries to become more green utilizing solar and wind energies while reducing water usage. In developing countries there should be over $100 billion per year starting in 2020 to help those economies grow while keeping greenhouse emissions at a minimal.
David Fuller's view
There are no climate calls in our charts but I can say that so far the Gulf Stream has been very kind to us this winter in London. Our gardens have been blooming since mid-January with the earliest spring that I can recall. Winter coats hats and gloves have stayed in the closets. We have had some rain on most days but I am not complaining because it helps to keep the air clean.
I have been occasionally frightened but mostly wryly amused by the extreme weather forecasts that I have heard during my life. So far Mother Nature has been a mostly benign influence without much help from our species although that is beginning to change.
Privatisations? Who Do You Think You Are Kidding Mr Putin?
Here is a brief section of this interesting column by Ben Wright for the Telegraph:
This has very real implications for investors of all stripes. For years now global sovereign wealth funds have been using their vast stashes of petrodollars to buy assetsfrom US bonds to London propertyaround the world. Sovereign wealth funds owned 9pc of all global equities and bonds in 2015 according to Capital Economics. Now they've switched from buying to selling. JP Morgan has predicted that sovereign wealth funds could try to offload up to $80bn (56bn) of equities this year alone. Gulp.
David Fuller's view
'Gulp' indeed. Stock markets have had a dreadful start to the year and sovereign wealth funds are certainly contributors to the selling. Low government bond yields also confirm that investors have retreated from stock markets.