If we have been in something of a financial ‘upside down’ for the last 10 years or so with negative interest rates and hugely accommodative monetary conditions, what have been the effects and what might lie ahead?
Markets continue to come to terms with the return of higher volatility, triggered ostensibly by fears of inflation and the unwinding of highly leveraged short volatility positions at the beginning of last month.
Actually, it has not been one long expansion since 2009, as we now can see how the slumping oil price caused a mini-recession a few years back.
John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com
Our London-based Emerging Market fixed income analyst predicts increased volatility ahead for Latin American markets due to the threat of Leftist election victories this year, but that pro-market reforms will still progress.
Our updated view remains positive on the global economy and equity markets even as global bond yields rise a bit further. Our SPX target remains near 3000 by year end, with impressive gains elsewhere too.
A broad-based synchronized recovery continues to gain traction. Following the strongest year of global growth since 2010 (estimated at 3%) the consensus forecast for the current year looks to be even rosier.
The MSCI AC Asia ex Japan (AxJ) Index declined 5.0% in USD terms, as better US economic data prompted worries about inflation and expectations of faster interest rate rises from the Federal Reserve.
In February, US Treasuries (USTs) succumbed to a further sell-off, with yields rising across the curve prompted by better US economic data.
The Japanese equity market fell in February, with the TOPIX (w/dividends) dropping 3.70% on-month and the Nikkei 225 (w/dividends) tumbling 4.41%.
In my view, Japan is the only major country that is going through a structural improvement in corporate governance, and, thus, deserves special attention by global investors.