{"id":165248,"date":"2020-02-20T07:40:47","date_gmt":"2020-02-20T12:40:47","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=165248"},"modified":"2020-02-20T07:21:21","modified_gmt":"2020-02-20T12:21:21","slug":"asset-correlations-are-no-longer-making-sense","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/02\/asset-correlations-are-no-longer-making-sense\/","title":{"rendered":"Asset correlations are no longer making sense"},"content":{"rendered":"
February 20, 2020<\/div>
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By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime<\/a><\/strong><\/p>\n

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US and European equities are at record levels and US Treasuries are trading close to their October highs; meanwhile, gold prices have climbed to a new seven-year high. It seems investors are simply buying everything and that could be worrying\u2026<\/p>\n

Investors who were sitting on the sidelines anticipating a 10-20% correction in stocks after the coronavirus outbreak have been left behind. What is driving this rally? It is monetary policy expectations, pure and simple. The US Federal Reserve and the European Central Bank are committed to keeping interest rates low, and extra liquidity may still come from reviving bond-buying programs. The Bank of Japan is ready to cut rates even further, while the People\u2019s Bank of China and other emerging market central banks are already in the process of further loosening their monetary policies.<\/p>\n

While valuations are extremely high, we\u2019re not yet near the highs of the late 1990\u2019s dot.com bubble. However, the \u2018FOMO (fear of missing out) \u00a0rally\u2019 may soon lead markets to the euphoria stage.<\/p>\n

Investors buying equities at current levels are not anticipating better economic conditions or higher corporate earnings. In this scenario, US Treasury prices and gold too, would be much lower . When assets perform in such a way, it is clearly an environment that suggests irrational\u00a0behavior by investors. They still want to participate in the equity bull market, but at the same time, buy safe haven assets to protect their portfolios from a potential downturn.<\/p>\n

What we are clearly missing in this equity rally is solid fundamentals. The impact of the coronavirus on the global economy may well be underestimated. A drop in newly infected cases doesn\u2019t immediately translate into an end of this pandemic. Many factories in China remain closed and the global supply chain has been disrupted already.<\/p>\n

Apple has been one of the few large companies which issued a revenue warning and market participants should expect many more to follow. Similarly, expect to see global growth and the earnings outlook revised lower for the first quarter of 2020. When equities are priced to perfection, it\u2019s hard to escape a market correction.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Disclaimer: <\/strong>The content in this article comprises personal opinions and should not be construed as containing personal and\/or other investment advice and\/or an offer of and\/or solicitation for any transactions in financial instruments and\/or a guarantee and\/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.<\/em><\/p>\n<\/div>\n

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\"Forex-Time-Logo\"Article by ForexTime<\/a><\/span><\/strong><\/p>\n

ForexTime Ltd (FXTM)<\/strong> is an award winning international online forex broker regulated by CySEC 185\/12 www.forextime.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Hussein Sayed, Chief Market Strategist (Gulf & MENA), ForexTime US and European equities are at record levels and US Treasuries are trading close to their October highs; meanwhile, gold prices have climbed to a new seven-year high. It seems investors are simply buying everything and that could be worrying\u2026 Investors who were sitting on […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-165248","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165248","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=165248"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165248\/revisions"}],"predecessor-version":[{"id":165253,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/165248\/revisions\/165253"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=165248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=165248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=165248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}