Is there an Archimedes principle at play in financial markets? As central banks withdraw liquidity by shrinking their asset holdings, does it inevitably imply bad news for investors? We look to theoretical, historical and contemporary clues to find out.
The US yield curve has consistently flattened since the Federal Reserve began tightening monetary policy several years ago. History strongly suggests that this is an entirely normal market reaction to a rate hiking cycle. If short-term interest rates continue to rise at the pace we expect, we could well be looking at an inverted curve by the middle of 2019.
Without immigration, Europe's population is set to decline by around 10% over the next three decades. Japan's experience serves as a warning about the difficulties of managing public finances and expanding corporate revenues against that backdrop. So is Europe's situation sustainable?
Political risk is back with a vengeance in Italy. As the third largest global issuer of government bonds after the US and Japan, the country is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to bail out comfortably using tried and tested mechanisms.
Changes in government policy don't always bring about the desired results; that's the law of unintended consequences.
The Hong Kong dollar is tied closely to the US dollar. Monetary policy made in Washington therefore applies directly in Wan Chai and Kowloon. In recent months, the Hong Kong Monetary Authority has been obliged to shrink its balance sheet rapidly to maintain the fixed exchange rate. This serves as a real-life policy experiment of the effects of quantitative tightening in a financial system. So far, nothing has blown up, but Hong Kong equities have been under pressure as financial conditions have tightened.
As 'Mary Poppins Returns' hits the cinema, we ask what the original film can teach us about investing