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The most dispiriting feature in the world's current situation is the feeling that there is almost a total lack of progress, and nothing epitomises it better than the Greek saga recapturing the headlines. In case you missed it, the posse formerly known as the troika is still haggling with the Greek government over the terms of the memorandum supposedly agreed upon last August. They are in a hurry now...because they fear another long hot Greek summer. Yes, 8 months after Tsipras reportedly surrendered to the EU (and 16 months after his election), nothing has happened. Yet. Furthermore, these Byzantine discussions are utterly devoid of any purpose. Greece will never reimburse that debt, because it is simply not possible. So, why the masquerade?

The same diagnosis applies to our central bankers. I had promised myself that I would suspend my endless rants at Draghi, Yellen & co at least for a month. However, a brilliant chart from Albert Edwards (the perma bear who probably was Cassandra in a previous life at the time of the Trojan war), made me break my promise. Though, this chart does not tell me anything that I did not know really, it encapsulates in a crystal clear way the trap in which Yellen let herself get entrapped. It shows that each time the Fed mentions "risks to the global economy" (the code word for dithering on rate hikes), the S&P 500 has been on a very bad run. Each time, it drops the mention, the index has just had a very good run.

In June 2015, there was no risk, in September there was. In December (coincidentally the time when she raised the rate by 25bps), there was no risk but in March 2016, that risk was back. Can someone explain to me why the world economy has turned into some sort of never ending blinking lights on a Christmas tree? Truth of course is that it has not. She has just let the equity market dictate the US monetary policy. The tail is firmly wagging the dog.

Nothing new there? Maybe. However, I cannot help to notice the competition between Draghi, Lagarde, Yellen and their fellow central bankers to come up with the gloomiest assessment, and the fact that other voices are now joining them in increasing numbers. The topic du jour is negative interest rates and dropping cash from helicopters. The very weak economic expansion in the US in the first quarter and the fact that manufacturing declined in March in the EU are unfortunately making another lurch into dangerous monetary experiments if not a certainty at least a clear and present danger.

Lionel Rayon

Lionel joined Schroders as part of the acquisition of Cazenove Capital in the summer of 2013, having been at Cazenove since 2005. He is a senior member of the pan-European equity team and manager of the Schroder ISF* European Alpha Absolute Return (circa $1 Billion AuM). He is also responsible for developing and maintaining a fundamental and valuation screen of European stocks. The screen forms the basis for generating ideas for potential further detailed investigation by the European team within the framework of their disciplined Business Cycle Approach. Lionel joined from Citigroup where he was a Director in the European Tech Research Team. Prior to Citigroup, Lionel had been with Schroders Securities, as a French specialist, Nomura Research Institute, as a metals & mining specialist, Enskilda and Chevreux de Virieu. Lionel graduated from Indiana University (MBA) and Institut d'Etudes Politiques de Paris (BSc economics & finance). He has 20 years of equity research experience.

Website: www.schroders.com

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