Income & Fixed Interest Newsletter – June 2018
Well that was certainly fun. Over recent months we have been making the strong case that as a result of the normalisation of global monetary policy, global liquidity will recede and market volatility will rise. Well it certainly did in May as Italian yields puked and global asset markets reacted. The era of Quantitative Easing (QE) boosted asset prices and bought forward future asset returns to today. We expect that in a period of Quantitative Tightening (QT) the reverse is going to happen. To be crystal clear, a normalisation of the QE experiment requires adjustments, and those asset prices that have benefited the most from the abundance of liquidity are likely to be the ones that will require the greatest of adjustments.
This month, I focus on the current key events, the casualties of May and how markets will continue to unfold.