Markets are propelled by what hasn’t happened

WHETHER you are examining the evolution of the US economy or the impact of monetary policy, one of the noteworthy developments this year is not what has happened, but rather what has not.

We were reminded of this over the last two weeks by macroeconomic data and by quarterly bank earnings. It is a phenomenon that, crucially for markets, has meant that interest-rate risk has not translated into any material credit risk – a relief that traders and investors are happy to run with despite residual uncertainty.

Consider some examples that reflect this general theme of what has not occurred: