Morning Report Wednesday 20 January 2016
Are we heading for a worldwide recession is a question that nobody knows the answer to, but there is no doubt as an investor if you read today's press; concerns must be growing rapidly.
Bond markets (interest rates) are where significantly more money is traded than in stocks, they are regularly referred to as the smarter of the two markets.
So to try and get a handle on how bad things actually are in the world economy let's turn our attention to some bond markets:
Locally the Australian 3 year bonds have basically been unchanged for 12 months, trading around 2%, implying markets are uncertain what the next stage is economically - see chart 1.
Credit spreads have advanced slighly over recent months but not particularly in the banking sector implying strongly that we are expecting a "growth scare not a credit scare" - which should be a big relief for investors.
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