In the recent period we have seen:
– An increase in the prices of risk-free financial assets;
– A return to high volatility in the prices of risky financial assets, with a downward trend in these prices.
We believe this situation is the logical result of the modest global growth and bad economic news in many countries. These disappointments concerning growth have led to:
– A legitimate rise in investor risk aversion;
– The continuation of a highly expansionary global monetary policy.
If there is both strong growth in liquidity, a high level of risk aversion and uncertainty concerning global growth:
– Liquidity will head to risk-free assets and not risky assets;
– Investors will be attentive to the economic news flow and react to news by transferring large amounts of capital, hence the return to volatile asset prices.
