THIS TOO SHALL PASS
With “relative” calm on the geopolitical front, we again find ourselves at a stalemate with regard to the appropriate level of yields and the apropos spread for risk. From this perspective, it’s a pattern that has become all too familiar this year, as yields remain low throughout the developed world and the list of investment alternatives remain scarce, at least from a fair value perspective. The recent volatility that has been introduced into the market over the past few weeks gave pause to concern that we were possibly going to break the pattern of complacency that has pushed many parts of the markets to multi-year tights, if not all time high valuations. This has been especially true in the U.S., which is again proving itself to be the best house in a lousy neighborhood, with the hope that taking care of one’s property would spur those nearby to also improve the “hood”. One region in which this has not been the case is Europe, where European bourses are all decidedly in the red since the ECB moved the interest it pays on excess reserves into negative territory, a tacit acknowledgement of the dimming prospects for the EZ’s growth and inflation opportunities. Interestingly, Asian bourses have been the strongest performing during this period, with China and related exchanges moving from worst to first in many instances.