No more taper tantrums

Markets are reacting to a possible bottoming out of US inflation and that the tightening monetary cycle will end significantly lower than usual

ARE we experiencing a new conundrum in financial, and especially bond markets? While common wisdom at the turn of this year suggested that both equities and long-term yields should trade higher, developed stock markets have so far stalled while commodities or India's and Indonesia's (two out of the so called "Fragile 5") exchange markets posted the best performances year-to-date. Even less expected is the behaviour of US long-term interest rates, which fell from 3 per cent at the end of December to a 2014 low of 2.58 per cent on May 2.

Like many, we advocated that equities were the best space to be this year and, despite a shaky start, we still think so. Unlike many, we were and remain supportive...

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