Marc-Antoine COLLARD, Chief Economist, Head of Economic Research, Asset Management, Europe
The divergence between the sovereign bond market and the stock market widened sharply as bad news on the economic front was interpreted by equity investors as good news, as it dissuades the Fed from tightening monetary policy, thus prolonging the business cycle. This Goldilocks-like scenario is, however, highly uncertain. Indeed, risks to the global economy are decisively tilted towards lower growth than expected, which would force the Fed to cut rates more aggressively than it foresees. Is that really good news?
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