The bond correction that followed the deflationary shock of the 1st wave of COVID started in the summer of 2020 and has continued almost steadily until now. The yield on the 10-year T-Note has thus risen from just over 0.50% in August 2020 to over 3.00% recently (with a sharp acceleration between early March and late April).
War is, regrettably, part and parcel of the history of mankind. As Carl von Clausewitz famously said, “war is simply the continuation of political intercourse with the addition of other means”.
The world that resulted from the reunification of Germany and the disappearance of USSR (1989/91), in other words the world of peace dividends, is well and truly over.
The impact of the war in Ukraine on the markets will depend on the duration and extent of the conflict, but also on the possible extension of sanctions. Indeed, History shows that if local conflicts have a limited effect on stock markets, this is no longer the case when they impact energy and commodity prices.
In our view, the January sell off was “just” a correction and not the beginning of a bear market. So, even if we should not be under the illusion that the market will return to its peak level rapidly, this drop could be considered as a good entry point.
Are we currently seeing formation of a bubble, or even a bubble peak, following the past four month’s rally? Indeed, over the period, despite the slew of bad news, the S&P 500 experienced just two slight consolidations. Could the sell-off of the past few days not be the first signs of a deeper downtrend on a 6-month horizon?
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We forecast global GDP growth of 4% on average in 2022, slightly less than the consensus (4.4%). But what counts most is nominal GDP growth as it is the main determinant of EPS growth, which should be stronger (8 to 9%).Read more