Synchronized global central bank & fiscal policy stimulus in Q2 was breathtaking. Near term, it is stunting the carnage caused by Covid-19, including economic growth plunging at a rate not seen since the Great Depression.

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Why Stock Markets Went Down and Then Bounced Up

As the Hammer strategy to combat the Covid-19 virus evolved to prioritize health through physical distancing, whole chunks of the global economy shut down.¹

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The Ghosts of People Past

The suppression strategy against the virus is still intensifying more than it is easing. Acting quickly and aggressively with physical distancing brings down the hammer on the transmission speed, the first part of The Hammer and The Dance eloquently described by Tomas Pueyo¹.

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2020 SO SO

The last quarter of 2019 placed an exclamation point on what was a banner year for risk assets. More defensive allocations to fixed income also performed well, primarily due to a Federal Reserve that engineered a historic pivot from raising rates to delivering three rate cuts.

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The Fed Pivot - from Swagger to Stagger

Three themes that took root a year ago remain familiar; sluggish global trade exacerbated by China-US trade tensions, evidence of a maturing economic cycle in North America and beyond, and stock market volatility flowing on the Trump news cycle and spiking on unheralded neck wrenching tweets.

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 Windfall to bondholders

Interest rates globally have collapsed. US 10-year government bonds now yield 2.0%, down from 2.5% at the end of Q1 2019.  Incredulously, 10-year Greek government bonds are also now yielding just 2%, despite having credit ratings that are of speculative grade.

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Is discretion the better part of valour? Often. But not always when it comes to the financial markets.

Let’s take a quick tour of the development of the US interest rate markets. It sheds light on the stock market outlook.

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Financial markets are tight. Company valuations seem rather full. Several short-term market trends, investing opportunities and pitfalls, revolve around who gets or loses their “free (or discounted) rides”.

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What is a bond? Simple.

A bond is a promise to repay in the future.
Often with interest along the way.
With conditions as easy as they have been over the past decade, a payoff from holding bonds was simple indeed.

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Here are a couple of the questions we are currently musing over at AUTHENTIC. Will President Trump step in to support Stormy markets as the central banks step back?

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The past decade – It is worth a quick look at just how stock markets have been performing. Looking at the decade to the end of March 2016 is likely as good as any, since it captures the peaks in 2007 and 2015, and the trough in 2009.

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It was a good year for AUTHENTIC's Clients. We enter 2018 forging ahead with our current strategies.
For greater constructiveness and a better balance, we are informed by the following learnings from last year:

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When I was a boy spending vacations with my grandparents in the Maritimes, some of our pastimes included playing cribbage, kick-the-can with the neighbourhood gang, adjusting antennae in an attempt to tune in one of two fuzzy TV channels, dinner table storytelling, and stringing Newfie jokes together to try turning groans into laughs.

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All too often we underestimate the connections between people and organizations around the world. 30 years ago, a fellow grad student named John (now Senior Research Advisor at the Federal Reserve Bank of San Francisco) and I, were invited to join our Supervisor, Prof. Mervyn King (subsequently Governor of the Bank of England) for dinner with his friend Larry Summers (subsequently US Treasury Secretary).

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Broad acceptance of the rule of law in America is crumbling before our very eyes. President Trump’s repetitious vow to uphold the “Rule of Law” made me realize it. Too many of history’s unsavoury leaders have emphatically espoused it as a ruse while abusing it the most. This revelation is deeply troubling.

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Where were you on the pleasant late summer’s eve of Sep. 4, 2013? My daughters and I were at the US Open in Flushing Meadows, NY watching Victoria Azarenka and Rafa Nadal play their way into the finals (to lose to S. Williams, and become Champion, respectively). During breaks in play to accommodate TV commercials, stadium cameras panned the audience, projecting famous faces on the big screen.

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The law of large numbers is a theorem of probability which asserts that if you perform an activity a large number of times, the average long term result should be close to the expected value. Flip a fair coin 3 times, it may well come up heads 3 times in a row.

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All is not well amongst the citizenry. A groundswell of public opinion is becoming palpable against the darker side of global capitalism.  The unfettered flows of capital and people across borders are causing unease amongst a growing number of domestic citizens, with a feeling of mistreatment at the hands of the elite few and foreigners.

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The past decade – It is worth a quick look at just how stock markets have been performing. Looking at the decade to the end of March 2016 is likely as good as any, since it captures the peaks in 2007 and 2015, and the trough in 2009.

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Traditional economics has been turned on its head, escalating the challenge of pricing assets. Here are four perspectives.

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Welcome, Prime Minister Trudeau the 2nd. You inherit a True North dependently, not strong and free. Oh Canada is the name, panning our currency is the game. Alas, we are not alone. Beggar-thy-neighbour banking is de rigueur Realpolitik these days. The European Central Bank is swirling water over the euro, hoping to retrieve gold at the bottom

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