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‘Run Screaming For The Hills’: Presenting The Fallacy Of Disaggregation
Let me just say, by way of introduction to the excerpts you'll read below, that it is absolutely bey
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Great analysis from Ashmore. The markets have been coddled by the Fed to the point that it has forgotten that there can be prolonged macroeconomic downturns without fiscal intervention (not monetary). After 2008 there has simply been an assumption that the Fed can simply helicopter money the economy out of any excessive risk-taking, when the reality is that the Fed killed the beast of 2008 by using all of its ammo.
This is excellent, and you can extend this article by examining the point about “removing QE slowly”, and looking at how markets will start reacting to that dynamic. Trend influences investment decisions even if it is slow. The big theory going around now says Draghi eliminated Bernake’s error of mapping out tapering by being vague. It will be more complex than that.
It is interesting that the “risk free asset” is the cornerstone of investment management, and central banks distorted that to such a degree. Maybe that is like messing with “Mother Nature”.