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Passive?!

‘Accepting or allowing what happens or what others do, without active response or resistance’

Source: Oxford Dictionary

The chart below from Bloomberg doesn’t look like passive behaviour, more like panic behaviour. The SPDR S&P 500 exchange-traded fund (ETF) suffered a record USD23.6 billion in outflows last week. The momentum investors that bought what went up, aggressively sold what went down!

One of the triggers for a sharp correction in bond and equity values was the January 2018 US unemployment report announced on 2 February and in particular, the average hourly earnings figure of 2.9% wages growth. Not only was this above consensus but with a tight labour market, brought fears of wage inflation, higher short and long term interest rates and a squeeze on labour intensive industries and their companies. Over the past month, ten year US Government bonds have risen 0.30% in yield to 2.85%. In the UK, Gilts for the same maturity have increased 0.28% to 1.62% in yield (Bloomberg 13/2/18). UK Consumer Price Inflation for the year to January 2018 at 3.0% (office for National Statistics).