The OECD issued its latest revision on global economic growth prospects, in the first of his two appointments or annual reviews. The overall impression is of slow growth and downward adjustments in earlier projections.
In USA GDP will expand even more slowly, at rates of 1.9% this year and 2.8% in 2014.
In Europe much more pessimistic, expecting a contraction of 0.36% of GDP this year and moderate growth of 1.1% in 2014. The main problem remains the debt.
For Asia disparate and curious vision, the two largest economies China
and Japan grow although downgrades the first, to 7.8% and the second
upward to 1.6%. Curious because if China grows below 7.8% will be a warning sign of weakness and would alert the government while if Japan grows by 1.6% all happy ... not the Nikkei has left a 5.15% on the session.
U.S. bond markets nervous, considering that the expected growth without
being robust, it could be enough to affect the asset purchase program
by the Fed.
Furthermore bonds approaching resistance area
(in profitability or price support, as you look) interesting from a
technical perspective, the 10 years in 2.4%, which if exceeded invite
managers to modify some strategies.
The technical aspect of fixed income USA invites caution for months, as I come through the graphic exposing long stretch following:
Bonds "high Yied" are also suffering falling sales and prices in line with the sovereign. You can read at this link an interesting article about the risks of rising rates, derived from the tendency to convexity hedging.
A reference to the debt market USA is the ETF (AGG) designed to track the performance of all U.S. debt,
Total U.S. Bond Market ETF (37% Treasuries, 28% MBS and the rest in
corporate and agencies) capitalization of $ 15,600 million is also
falling in price and this will be five weeks straight and falling sales.
Generally, when the bonds fall weak moves financial markets assembly
and intermediate trends ruptures tend to bring major changes in the
outlook and portfolio adjustment, feeding additional losses in assets.
This time, before such change in the mindset presumed investor and as
turbulent markets, handled all markets fall? Unison or there will be a
mass migration of Fixed Income Funds Equity?.
Uncertainty about the Great Rotation is debated
and concern among fund managers and selectors will depend largely on
market confidence about staying "apuntaladora" Bernanke and real
economic opportunities.
In view of the behavior of the Fed, it could be argued that the Great Rotation want to further enhance asset reflation and get the expected wealth effect that can finally bring down the pernicious tendency of the money multiplier.
Specific corrections in stock prices are necessary
and "healthy" for the strength of trends, there should be an adjustment
at any time, perhaps coinciding with breaks bearish on bonds.
After an eventual correction
will attract capital bags different sources, one of them raised
liquidity proceed with the settings fixed income portfolio and if the
helicopter flies over satin, as the FED-BAG correlation is 85%.
True, stock valuations discounted cash flow worsen with rising interest rates and subtract bag. However, the bag can also grow through multiples expansion as we tested several times.
The music continues to play and as said the CEO of City before the
debacle, must keep on dancing ... but unlike Mr. Charles Prince also closely monitoring the situation to avoid being caught in an artificial rise will end in tears, as the rest.
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