Global markets’ defensive positioning could prove more lasting
Analyst Tim Emmott points to discussion about policy error that emerged after the latest US Fed meeting, the continued difficulty the ECB faces in raising interest rates and negative data out of China
While on-again, off-again risk aversion is the mantra for global markets in this age of trade spats, here’s a sign that the latest flight to safety may endure beyond US President Donald Trump’s next tweet. A Morgan Stanley index that tracks correlation among regions and asset classes has reached its highest level since December 2016, a possible signal that the market’s defensive positioning could prove more lasting, according to a note from Tim Emmott, executive director at Olivetree Financial. "The fact that this index is trending higher currently could well be the true signal for market players to realise that current multi-asset moves toward risk aversion may be more than short-term," according to the note. So far in 2018, flights to safety have occurred in short-lived bouts spurred, for instance, by the latest twists in trade tensions, without much of a domino effect across asset classes. The VIX index still sits at its five-year average, while treasury and currency volatility m...
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