PA ANALYSIS: Are markets in the eye of the storm?

Added 25th July 2016

Humans have a remarkable capacity for adaption and the investment management sector is no different.

PA ANALYSIS: Are markets in the eye of the storm?

Had you told someone ten years ago that whole swathes of the developed market government bond sector would be in negative territory, you would have been laughed out of offices throughout the city.

Likewise had you said mere months ago that a coup attempt in Turkey and fears of systemic weaknesses within the Italian banking system would fail to move many market needles, a few eyebrows would have been raised.

Yet, according to the Bank of America Merrill Lynch, in the past week, far from running for the hills, they have instead run for emerging markets.

The firm pointed out in its latest flow show there has been a stampede into the sector, with record inflows into EM debt funds ($4.9bn) and the largest EM equity inflows in 12 months ($4.7bn) as yield-hungry investors chase carry in EM debt markets, “happily assuming every interest rate in the world will fall to zero, as well as capitulating into "weak dollar" winners”.

At the same time, the volatility index has collapsed to around a two-year low and many markets are moving sideways after the initial post-Brexit moves. All of which has a number of commentators, including Portfolio Adviser, worried that perhaps markets are becoming a little too complacent.

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About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



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