Complacency

Global equity markets are complacent. You can see in the chart below that most developed markets are at all time highs. Concentration, fueled by buybacks, driven by debt, and with a clear risk of reflation, investors may see equity markets as a potential escapade from the current scenario. Only Emerging markets offer a good balance of value and opportunity at his point, but investors are underallocated, as they confine themselves to play the momentum chip. In the meantime, gold has broken the $3,500/oz mark in the cash market, and the futures are already breaking $3,600/oz. This should be cause of concern, but it looks like it isn’t. In France, the fiscal situation and the government stability are deteriorating rapidly, and yields on the long end of the French curve are ramping up. Similar situation is happening in the UK, with yields above 5%. Bond markets are being attacked by a surge in inflation as a consequence of too much government spending and too much debt. In the U.S., the Treasury continues to issue T-Bills as there is no real demand for long bonds at reasonable yields. We are one straw away from breaking the camel’s back. And we may have reached a point of no return. Central banks interventions are coming.

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