Monthly Market Report - March 2016
25th February 2016With commentary from David Stevenson
Deary, deary me. The start of 2016 is currently shaping up as one of the worst on record. Strangely though the ingredients for the current malaise haven't changed very much from late last year. China is possibly having a harder soft-landing than expected or even just a hard landing, depending on whom you talk to. Oil prices continue to slide, as predicted on these pages. I stick to the view that oil market won't settle until we're below $20. Investors are also still fretting about a global slow down with even Fed boss Janet Yellen weighing into the debate about the risks to the downside. The only new ingredient seems to be worries about the insolvency of the big European banks, with bond investors focusing on the possible impact of negative interest rates on bank margins. Bank bond CDS rates have shot up and overall Bond yields continue to tumble - astonishingly UK Ten year gilts now yield a risible 1.31%.
But I would argue that there have been no real shocks, just a gentle sense of mortal fear overwhelming investors. The US and UK economies continue to push ahead, albeit at a slower pace. Bond investors seem to think that the current dreary impasse might shock central bankers into giving the global political elite a good kicking and deliver structural reform. Good luck with that! Bond investors are also still fretting about the huge levels of global indebtedness, but quite how they might change this deeply ingrained behaviour set is something of a mystery wrapped up within a puzzle. But itís not all unremitting despair and gloom, at least not for structured product investors. This month saw the launch of the excellent 2015 Structured Product Annual Performance Review, compiled by Chris Taylor from StructuredProductReview.com and Lowes Structured Investment Centre. The two graphic tables below tell a remarkable story - over the five years in this analysis 1875 products have been issued but only 42 have involved loss of capital. The average annualised return was 6.36%.
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