Jim Reid of Deutsche Bank wrote in its annual outlook for the debt market, the current credit cycle turns. Ahead - the widening of spreads such as those that were in the midst of the European crisis - on materials AMarkets.
However, Reid says, and that markets and investors are unpredictable. This factor can dramatically reset or adjust any serious prognosis. Trump, Victory played like no one expected: instead of sales, there was a feast of the bulls. For some reason, investors are massively decided that the new president - this ultrapozitivny factor for America and American shares. Since winning Trump and followed her ups S & P500 market expectations have become much more optimistic.
The probability of recession in the US has declined against the backdrop of the expected massive cost of the new Administration costs. All is good, if not for some important circumstances. Congress is not so pleased with Trump, as I would like to mid-market player. In addition, on the nose - the rate increase. The increase in rates - this is always the most dangerous point, after which swelled to cheap money the stock market can give a crack, burst ... then all will not find it. According to Reid, monetary easing as the main instrument to stimulate the American economy is not going anywhere in 2017. Instead of the traditional QE with the direct participation of the Fed's quantitative easing will be a massive force other central banks - such as the ECB and the Bank of Japan's forces. These "helicopter money" will move from the economy to the economy. And they are in the trillion-scale necessarily settle in America. In particular, in the form of investment in large-scale projects of Trump. QE resources of foreign central banks favorably America.
The larger the scale of the liquidity injections, the greater the likelihood that Treasuries yields will not rise high. It will be worse if Japan did not go to the defense of their bonds from growth. Or if the ECB decides to suddenly collapse monetary stimulus. From all this it becomes clear that protectionist sentiment Trump will not be fenced off from the rest of the world - its dependence on other countries is colossal. And this dependence is more than Obama has.
Reid wrote that the global economy next year will fall in a strong dependence on Japan and Europe - depending on the policy of monetary stimulus in both countries. Another thing - if the budget expenditure will be massive number of countries, the volatility in the financial markets will increase and will decline as central banks intervene in the process by using the printing presses.
Another dangerous moment - the sale of Treasury debt by foreign players. If the process of sales will connect China and / or Saudi Arabia, Trump would have to "build relationships" also with them, not only with the EU and Japan. The bottom line - Trump will have to put aside their "alpha ambitions" and begin to adapt.
