Ben Bernanke started the latest round of positive analogies with his comment "I think all of our efforts so far have produced results, and I think as those green shoots begin to appear in different markets, and as some confidence begins to come back, that will begin the positive dynamic that brings our economy back."
Do we have "green shoots"? This question will be the focus of all markets in the coming weeks and the fact that there are not clear signs of growth will mean that many markets will continue to stay in a range.
While equity markets have show signs of a rally, the same cannot be said of currency or fixed income markets. In fact, stocks, which have shown the strongest behavior, have been discounted by many a a bear market rally. Looks like the green hoots may still get a frost.
The fixed income markets have been range-bound because the green shoots story has placed the market between a continued negative growth state and a "slowdown of the slowdown" state. The slowdown or second derivatiev story is not very positive. Large supply overhang from the federal deficit means supply is a strong consideration. While inflation should not be a problem with the large output gap at this time, there is a significant amount of inflation talk that has pushed the long-end of yields higher.
Currency markets have been mixed because the "green shoots" story has been highly variable around the world. There has been a significant increase in risk taking through the improvement of carry trades but the combination of quantitative easing by many central banks with significant declines in exports has laced a high degree of global uncertainty in these markets.
Do we have "green shoots"? This question will be the focus of all markets in the coming weeks and the fact that there are not clear signs of growth will mean that many markets will continue to stay in a range.
While equity markets have show signs of a rally, the same cannot be said of currency or fixed income markets. In fact, stocks, which have shown the strongest behavior, have been discounted by many a a bear market rally. Looks like the green hoots may still get a frost.
The fixed income markets have been range-bound because the green shoots story has placed the market between a continued negative growth state and a "slowdown of the slowdown" state. The slowdown or second derivatiev story is not very positive. Large supply overhang from the federal deficit means supply is a strong consideration. While inflation should not be a problem with the large output gap at this time, there is a significant amount of inflation talk that has pushed the long-end of yields higher.
Currency markets have been mixed because the "green shoots" story has been highly variable around the world. There has been a significant increase in risk taking through the improvement of carry trades but the combination of quantitative easing by many central banks with significant declines in exports has laced a high degree of global uncertainty in these markets.
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