Buttonwood: Squaring the circle

Posted: September 6, 2013 in economy
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Fight this war, not the last one

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Financial markets are sending incoherent messages

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THE world’s financial markets have been marked by contradictions throughout 2013. Inflation has dropped but government bonds have suffered. Risk appetites have revived but emerging markets have underperformed.

Perhaps such anomalies are inevitable given the influence of central banks on market sentiment. Offered a choice of knowing in advance the growth and inflation numbers for 2014, or the precise details of Federal Reserve asset purchases next year, investors would probably opt for the latter. If fundamentals are not driving the markets, then fitting price movements into a coherent economic framework is inevitably harder.
More recent developments have at least had a familiar ring, as markets were once again affected by the curse of August. In the first half of last month, bonds suffered as yields rose …

via Economic Crisis http://www.economist.com/news/finance-and-economics/21584983-financial-markets-are-sending-incoherent-messages-squaring-circle?fsrc=rss


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