Thought for the day
" Pictures deface walls more often
than they decorate them.
-
William Wordsworth (English, 1770-1850)
Word for the day
Renascent (Adj)
Springing or rising again into being; showing renewed
vigor.
(Source:
Dictionary.com)
Teaser for the day
If Naveen Tyagi and Niranjan Jyoti
are "Hindu", then I am not! Are you?
Despite the brave talk...
I had an opportunity to meet a group of learned financial market
participants last evening. With benchmark indices close to all time high levels;
10yr yields sliding below 8% after long; gold and silver prices in down trend
and copper prices slithering towards cycle lows - the sense of discomfort in
the room was palpable. From the discussion, I could gather the five major
trends that are bothering the discerning minds at this point in time.
(1) The global
environment that seemed stable and improving six months ago appears to have
taken a turn to the worse. All efforts to accelerate global economic growth
through unconventional monetary policies have yielded little result. Major
economies of Europe, China, Japan, Russia look more vulnerable today as
compared to 2008-09 crisis period. The stability in financial market as
measured by the yield of sovereign debt of most troubled European economies,
e.g., Spain, France, Italy, Greece, Portugal etc., seems a distortion and hence
unsustainable.
(2) The commodities'
world look seriously in trouble. The emerging and frontier markets that
supported the global economy post 2009 appear more vulnerable than ever.
Besides Euro area, many new points of vulnerability have emerged e.g., Latin America, Central Europe, South
Africa and Australia.
(3) US that appeared
as harbinger of global economic stability and growth till couple of quarters
back is posing more questions rather than providing solutions.
It is not yet clear how the USD would react to the rising US
rates. If USD strengthens in equal proportion it could be a double whammy for
emerging market businesses, especially those carrying huge USD debt.
Moreover, rising US rates may trigger a major USD carry trade
and all the USD of world start rushing back to US in search of higher yield.
This could be a disaster for EM assets, both equity and debt.
The rising cost of capital may impacts the US consumption demand
which is still fragile as shown by poor Thanks Giving numbers. Intuitively
lower energy prices should boost US consumer sentiments, but it appears that
there is paradigm shift in US consumers' savings habits. If higher costs
actually results in even higher propensity to save rather than spend, we may
have different kind of problems. The commodity demand may collapse further and
deflation specter may acquire even more ominous proportion.
(4) Union Budget for
FY16 has become a major milestone for investors hope, in the absence of any
concrete program for economic revival in past six months. A below par delivery
there could cause major disappointment and reevaluation of Indian economy.
(5) With Bihar
(2015), West Bengal (2016) and UP (2017) elections, PM Modi may remain engaged
in electioneering forever, leaving the governance to other ministers, who like
him may not follow the zero tolerance norm as seriously.
No comments:
Post a Comment