At a time when risky assets including stocks, commodities, junk bonds and
emerging-market currencies are rallying to multi-month highs, so are the havens, from gold, government bonds to the Swiss franc and the Japanese yen.No matter that the U.S. labor market is deteriorating and the World Bank has just cut its estimates for global economic growth. Investors either don’t believe the news is bad enough to kill a global recovery that’s already long in the tooth, or they’re betting that sluggishness in some of the biggest economies means central banks will stay more accommodative for longer. It sound’s pretty dovish, for now the only way to see if we are right is the market cycle’s and the timing game. .
Asset’s being driven by high liquidity that ultimately is being provided by central banks, It’s an unusual situation that’s a spill over from the 2008-09 crisis. Fund managers just have cash to put to work.
For much of the time since the financial meltdown eight years ago, investors have been in the mindset that bad economic data is good news for markets. The near-zero interest-rate policies by major central banks — and negative borrowing costs in Japan and some European nations — have pushed traders to grab anything that offers yield. And every indication that the liquidity punch bowl will stay in place is greeted by markets with a cheer. The latest euphoria started Friday when the U.S. job report showed America added just 38,000 jobs in May, the worst reading since 2010. That has eliminated any chance that Federal Reserve policy makers will raise interest rate from as high as 0.5%, when they convene next week, according to data compiled by Bloomberg based on Fed fund futures. The odds for a move in July have declined to 20%, from 53% a week earlier.
In the euro-zone, the European Central Bank entered new territory in its effort to stimulate the flagging economy, buying the debt of some of the continent’s biggest companies for the first time.
– “Earnings growth has plateaued. Business spending has sagged and global trade remains stagnant. On Tuesday, the World Bank cut its outlook for global growth this year to 2.4%, down from the 2.9% estimated in January”.