Displaying items by tag: monetary policy
JP Morgan Says the Fed Put Has Never Been Greater
(New York)
JP Morgan’s head of research, famed analyst Joyce Chang, published some very interesting views this week. She argues that the pandemic has forever changed financial markets, and highlights what she says are four “paradigm shifts” that COVID has caused. The biggest of those from a market direction perspective is about the Fed. She contends that the huge and extraordinary measures central banks have undertaken in the last few months have fundamentally changed the role of central banks towards financial stability (something they were arguably already focusing on).
FINSUM: In our mind it has become very obvious over the last few years, and especially during the pandemic, that the Fed’s most important mandate is financial stability.
A Big Financial Crisis May Be Coming
(New York)
One of the market’s favorite prognosticators has just called for a big financial crisis. Mark Mobius, 81, veteran investor, thinks that EMs are going to plunge, and that the normalization of interest rates and monetary policy will cause a crisis. “There’s no question we’ll see a financial crisis sooner or later because we must remember we’re coming off from a period of cheap money … There’s going to be a real squeeze for many of these companies that depended upon cheap money to keep on going”, says Mobius.
FINSUM: Emerging markets are currently having a rough time and the rise in rates is going to be turbulent, but calling for a Crisis seems a bit premature.
A Big Warning That the Next Recession Will Be Bad
(New York)
One of the world’s most famous fund managers has just gone on the record warning investors that the next recession is likely to lead to a brutal reckoning for markets. Paul Tudor Jones, famed for making a killing in the stock market crash of 1987, said that “highly dubious” asset prices are going to be hit as monetary policy exhausts quickly. He is worried that the US does not have any fiscal stabilizers to help ease a recession. Jones believes that interest rates will normalize and that asset prices will fall in the very long run.
FINSUM: This is a lot of doom and gloom, but it is hard to imagine it really being this bad. A bear market, maybe, but a total collapse seems unlikely.