#Weekly #Review - Financial Markets & Economics: Commentaries by Fabian Wintersberger

One more time Fed chair Jerome Powell used his hearings in front of the Senate Finance Comitee and congress to prop up the struggling stock markets and to push them to new highs. On Wednesday the Dow Jones Industrial Average closed at a new all-time high and also managed to break through the upper trend line. Although the index reversed down on Thursday I suppose that the journey is not over yet. We could see all the FOMO ( fear of missing out ) around investors for the last several weeks now and how they weigh into risk assets. Partly this also could explain the loss in (secure) government bonds which continued as well. US 10y treasury yields are near their 1.50 - 1.60 % line already. Additionally rising inflation expectations play a role there for sure. Many investors expect a mid-term pick up in inflation soon as we can see when we are looking at US 5y Breakeven rates, which are at their highest since 2013. It's hard to make predictions, especially about the future , Mark Twain ...

This week the run of steeper curves and rising long-term rates continued, not only in the US but in all advanced economies. Despite weak January inflation data of last week, market participants are still expecting rising inflation in the years ahead. Though the Federal Reserve does not seem to be too much concerned about inflation, as we could read in their Wednesday released Beige Book. In the meantime, Bitcoin is pushing higher and higher and above 50,000 US-dollar for the first time. Gold stays depressed, maybe because of the rise in yields and the euphoric risk taking of market participants. US 10y treasury yields rose to new highs, levels that we have not seen for a year and the chart looks very bullish as 10y yields broke out of the upward trend which started in August. Next resistance would be around 1.50 % - 1.60 %. All advanced economies are experiencing a steeper curve, 10y bund yields also are back above -0.4 %, trading at -0.32 % at the moment. Market participants expect st...

  For some time now, inflation expectations have been rising in the United States and, to a lesser extent, in Europe. Since the beginning of the year investors assume that the return of economic growth will lead to a pick up in inflation and some economists (for ex. Olivier Blanchard) already warn that the economy may overheat because of the huge stimulus measures. All this expectations led to falling prices of US treasuries and German bunds and an increased risk appetite among investors. In the US the "reflation trade" has been pitched very much recently, until we got the official US inflation numbers from January on Wednesday. Although many anticipated that inflation beats estimates the opposite was true. Is it because of the composition of the Index or do other observations draw a different picture? Will inflation be subdued longer? Some traders may have expected that the January US CPI-numbers will beat estimates: Globally, prices of several asset classes where on the ri...

After his second term as president of the European central bank ended in October 2019, Mario Draghi is back on the political stage. Following a meeting with Italian president Sergio Mattarella, Draghi declared that he agreed to become prime minister and to form a new 'technocratic' government. However, the world has become a different place since he left office at the ECB: We're in de midst of a pandemic we're fighting with more debt on the economic side while total debt is already at World War II levels. At the same time, stock prices are at all time record highs although all the euphoria does not find its' way into the real economy. Rising interest rates may interrupt the highly anticipated party... " Within our mandate, the ECB is ready to do whatever it takes  to preserve the euro. And believe me, it will be enough "   This statement my Mario Draghi of July 2012 is known everywhere in the financial world. This statement was enough back then to calm dow...