Equity – Profit Taking But…

Dollar-Dollars.png

The images that we have shared has truly shared our views of global central banks. With hindsight, it does seems that their intervention has had its good and bad days. Let us review the reasons and what consequences it might bring.

  1. Trigger Happy

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  • who can blame Mr Carney and the BOE on additional stimulus when the public and most market participants are mislead that the so called gloom and doom BREXIT will have such a negative impact on the market
  • why has the BOE and other central banks taken the stance to go all in to support the financial market pre-crisis level?
  • looking back, if they failed to provide the necessary buffer – will we see a meltdown made by the UK public? Perhaps global leaders are not ready for such scenario
  • going all in at that time has supported the financial market and revived the case of inflated assets which many would think slightly overpriced – but the buying continues since there are plenty of fresh QE money
  • further promises are made by the banks of further rate cuts to more QEs – looks like the BOE is no better from BOJ

2. Other QE tools

  • global central banks admitted that they might have run out of stimulus programs or tools
  • fiscal spending and talks of increasing infrastructure spending in the US and China should help boost the global economy again
  • BOJ is considering the unconventional Helicopter Money but this is far too early – nonetheless other central banks such as SNB is thinking to implement such tool
  • Β 2017 promises to be quiet an unconventional year by central banks as they transitioned into the 9th year of slow growth and heavily induced economy thanks to QE programmes

Baltic Dry Index.png

3. US Election & Italian Referendum

  • do we really have to choose between the two?
  • Renzi taking a huge battle but the underlying problem is not solve yet
  • Greece could resurface – Germany is facing pressure of anti-establishment
  • European leaders are busy talking about Brexit but things are moving very slowly
  • political and economical instability is looming with no changes or contingencies
  • these are some reasons that the US Fed can use to delay a 2016 rate hike

britain-leaving-eu-greece-but-im-staying-brexit

4. The Show Must Go On

  • what other choices does global central bank has now that it put all the chips on the table?
  • more QE seems to be the best tool
  • in search of greater yield – there is a strong tendency that global equity market should and could remain elevated for a long time
  • precious metals may offer an alternative form of diversification
  • strong rally and strong correction will be a norm but what seems to be clear is that there is no real solution unless there is a reset button

lemmings-hedgeye-600-300-300x189roller-coaster

5. Final Consequences

  • well how shall we start this? we are not fortune tellers so we truly do not know
  • aren’t we in all this together? yes we are but the global income instability will only stretch further and we are afraid social inequality is set to rise
  • global peace hanging by a thread due to over globalization and the chosen few? well put yourself in a position where you have a lot of money and power – what will you do? stick with the status quo and ignore everyone else might just be the best option to take or perhaps new innovation or distribution of wealth by those few chosen to appease the crowd
  • we truly do not know but shall leave that as a thought

Image result for global income inequality over time

Image result for hunger games

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