After $14-trillion was wiped off world shares in 2022, $4-trillion has been added back this month
From stocks to government bonds, markets have had one of their best starts to the year in decades but whether the run lasts depends on a Goldilocks scenario of inflation easing, economic growth holding up and borrowing costs falling.
At the other end of the spectrum, ultra-safe U.S. Treasuries and German Bunds have put in some of their strongest January performances since 2008, according to Datastream calculations. That followed tentative signs inflation has peaked and that central banks will soon pause rate hikes, with markets now pricing a just-right outcome of borrowing costs getting cheaper, while the world pulls back from the brink of recession.
“Equities were coming off a really challenging year, same with bonds,” Kamal said. “Obviously there was some oversold sentiment and clearly we have had some better news.” China’s reopening has lit up other buying signals worldwide, sparking rallies for the Thai baht, Brazilian real and Australian dollar. Emerging market debt issuance also had a record start to the year.
Major central banks have added almost 3,000 basis points to global borrowing costs in this tightening cycle to date.
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