10/10/18

"This Is The Tipping Point": One Bank Is Calling For A 30% Market Correction



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"This Is The Tipping Point": One Bank Is Calling For A 30% Market Correction
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While some believe that it is the level (or stock) of the 10Y yield during a rate rout that determines the resulting revulsion toward equities, while others claim that it it speed of the sell off (the "flow" angle) that matters, the reality is that the higher rates rise - whether fast or slow - the less attractive risk assets become (in a recent analysis, Bank of America calculated what the great un-rotation "magic number" is for yields).

And while violent repricings certainly have an impact on risk assets - if only over the short-term, until rate vol normalizes - as today's market action confirms, a more comprehensive theory suggests that the US dollar (the world's reserve currency) and US interest-rates (world's risk-free-rate) cycle play a vital role in determining changes in asset prices and the global economy, especially after the gold standard was abolished in 1971.

In a new note from Nedbank's ....

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