Swissies Part 2

Mon, 2018/02/05 - 2:22pm | Your editor
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Having weighed in yesterday with a report on the logic of selling US stocks if you are the Swiss central bank, I don't want to go so far as to predict that the selloff which continued today in Asia-Pacific and European markets is inevitable. It's not.

The US equity rise last year (and indeed since the bottom of the global financial crisis in 2009) is highly unlikely to go on. Our country, apart from an appalling administration, faces triple-whammy risks of higher inflation and higher bond yields. This trio of trouble is not shared by most of the rest of the world. And inexperienced Trumpians running the Departments of State and Treasury plus the Federal Reserve.

Another country where the downturn risk is as high as in the US right now is Britain, where the Theresa May government faces a Tory rebellion from hard-Brexit supporters like Jacob Rees-Mogg, Boris Johnson, and Michael Gove. Whether or not they manage to burn PM May who has another lousy track recover, they will affect the way the negotiations with the European Union proceed. Unfortunately for stock markets, overthrowing May may open the door to left-leaning Labour under Jeremy Corbyn, a risk the US Democrats will spare us from. She also cut her links to Trump by defending the UK National Health System which he added to his list of stuff to be rude about, which may help her with moderates.

In Mexico too I fear a switch to the left in the coming election, which will feature another attempt by the veteran Andres Manuel Lopez Obrador.

A curiosity is the mcuh bigger sell-off in crypto-currencies than the one in stock markets. Are they related? That suggests another idea.

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