Is a massive regime change in markets taking place?
This week has again been volatile for stocks. But the big news for investors is for the first time in a few years, bonds are acting again as a hedge against stock market drawdowns. Or in other words: after a period of positive correlation which wrecked 60/40 portfolios, the stock/bond correlation is turning negative again. This is an important development. Source: Alfonso Peccatiello
Top monetary assets worldwide
Source: Porkopolis Economics
Bank of Japan owns ~80% of the country's ETFs and 7% of the entire Japanese stock market, according to Morningstar and the Tokyo Stock Exchange data.
Moreover, the BoJ holds ~55% of the Japanese government bonds. Huge distortions 👇 Source: Global Markets Investor
An important development for portfolio construction: bonds and equities are negatively correlated again.
Source: Bloomberg, Alessio Urban
This is the ultimate reason why the Bank of Japan ‘needs to maintain monetary easing.’ DEBT
i.e the yen carrytrade is likely to resume sooner rather than later Source: Jeroen Blokland
JPMorgan: 75% Of Global Carry Trades Have Been Unwound
(yesterday they said that the unwinding was only half completed...) Source: www.zerohedge.com
Bonds have surged higher with the collapse in interest rates and the US Aggregate Bond ETF is now up 7.7% over the past year, outperforming the Treasury Bill ETF ($BIL +5.4%)
Source: Charlie Bilello
A worrying divergence...
Source: J-C Parets
