shutterstock-94201711-everett-collection-1
Everett Collection/Shutterstock
19 October 2016 Insurance

The song remains the same, only worse

At the beginning of this year, we wrote a piece called The Song Remains the Same. The basic message of the article was that we should expect the current environment of slow economic growth and low interest rates to persist. Given that developed world economies continue to struggle with structural issues such as large debt burdens and aging populations, we believed, at the time, that global monetary authorities would continue with their extraordinarily accommodating programmes and that interest rates would likely stay at (or near) their historically low levels.

In short, we did not see a lot to get excited about. Our return expectations for the year were modest and our general view of the risk/reward tradeoff in capital markets was uninspiring.


Where are we now?

Since the beginning of the year, these overall conditions have only exacerbated. In other words, the song remains the same, only worse. With the exception of a short-lived flare-up of risk in February, the movement year-to-date in financial assets has been a one-way train. Interest rates have touched new lows (with many developed government bond markets entering negative yield territory), risk spreads have continued to compress to below average levels and stock prices have renewed their ascent with US equity indices at all-time highs (see Chart 1) .

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk