The Short View

Mario Draghi managed on Thursday to talk down the euro – the latest volley in the cover ‘currency wars’. Ralph Atkins, capital markets editor, analyses the president of the European Bank’s verbal game theory.

Low interest rates suggest low equity returns – and even worse, shares can lose money over a lifetime. Scary charts after the jump.

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Politics is back on the agenda for investors. Spanish and Italian bond and stock markets took a tumble, reacting to a spreading slush fund scandal in Spain’s ruling Popular party and rising support for former Italian prime minister Silvio Berlusconi. James Mackintosh, investment editor, asks if a retreat from the eurozone’s periphery will herald a shift in market paradigm

Those hoping for a “great rotation” from bonds to stocks might start by looking for smaller rotations within the equity market. James Mackintosh, investment editor, says the signs are far from uniformly supportive of the bigger rotation.

One extra chart, before the video: monthly total returns on the US benchmark 10-year Treasury bond per month. January saw a loss of 1.94 per cent, including coupon payments, which isn’t great. But it is slightly less than last March’s loss, or October 2011, and pales in comparison with some of the monthly losses in the past. As the chart shows, this is far from solid evidence of the bond bubble bursting. Read more

US GDP dropped in the fourth quarter of 2012 for the first time outside a recession since 1977, thanks to surprise cuts in defence spending. James Mackintosh, investment editor, finds some good signs in the data, but worries that if good news comes through on the economy would be bad news for investors.

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Japan is the natural home of the bear, but its bull market from 2003-2007 looks very like the current US bull market. James Mackintosh, investment editor, looks at the parallels and considers what’s needed to keep the bulls running.

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James Mackintosh

Investors are desperately hoping for a return to normal markets, which would mean the end of the risk-on, risk-off paradigm. Risk-on, risk-off – which sees the price of pretty much all asset classes move together – has retreated a little, but is still a force in global markets.

One example is the global flow of money out of havens. Today’s video and column highlights one aspect of that: the rise in the US bond yield above that of neighbour Canada, as investors shift from the safety of US Treasuries to prefer the growth prospects further north. Rather than going away, this is typical of the risk-on phase of the risk-on, risk-off cycle. Read more

Just like Apple, companies are beating their low-balled earnings expectations, investors are lapping up equities but the growth outlook remains gloomy. James Mackintosh, investment editor, says eliminating extreme risks makes the lesser ones more palatable – for now.

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Today’s the deadline for European banks that want to repay early the emergency three-year loans from the European Central Bank. James Mackintosh, investment editor, consider the implications for the ECB and the currency wars.

FT investment editor James Mackintosh suggests the warnings of monetary policy hawks about central bank independence may be a little premature. He says Japan’s central bank has paid no more than lip service to the demands of new prime minister Shinzo Abe.

In his first term, US president Barack Obama oversaw the second-biggest rise in the stock market of any US president since the second world war. James Mackintosh, investment editor, says his second term hopes of economic recovery rest more on the housing market than equities.

Calm in the eurozone has come at a cost to the havens. James Mackintosh, investment editor, points to the sliding Swiss franc and sterling, and warns the premier haven of choice, London property, could be next.

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Small caps in the US have hit their fifth new high of the year and UK smaller companies soared past their previous peak a month ago – both climbing 172 per cent since 2009. But James Mackintosh, investment editor, warns that if the current rally peters out small caps look particularly exposed.

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The yen’s collapse was rudely interrupted on Tuesday. James Mackintosh, investment editor, points out that the yen’s premium as a haven from the global crisis has now evaporated, and examines the implications for the carry trade.

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James Mackintosh

If you go down to the woods today, you won’t need a disguise: the bears are all at their annual picnic (OK, conference) in west London, led by uber-bear Albert Edwards of Société Générale.

He’s picked a good day to warn of looming disaster: yet another indicator suggests investor complacency is approaching danger levels thanks to the new year rally.

Short-term momentum indicators were flashing red in Europe last week, and even after falling back slightly remain very high. Read more

More than half European companies have dividend yields above corporate bond yields for the first time, while mutual fund sales saw their biggest weekly inflow into equities since the US stock market peaked in 2007. James Mackintosh, investment editor, analyses whether this is the long-awaited rotation from bonds back into stocks – and how to compare them.

The UK’s inflation-linked gilts markets have just seen their largest one-day rise in 25 years – thanks to the decision of statisticians to do nothing. James Mackintosh, investment editor, looks beyond gilts to analyse what the real yields on government bonds are telling us.

The parade of best bourses so far this year is a rogue’s gallery of the past few years’ basket cases: Greece, Dubai, Egypt and Argentina, with the eurozone periphery close behind. James Mackintosh, investment editor, analyses whether this dash for trash is wise.

Several measures of sentiment suggest investors are becoming worryingly optimistic. Investment editor James Mackintosh says this is something which typically happens before the market drops back.

James Mackintosh

Investors could hardly be more excited about the pressure on the Bank of Japan from new prime minister Shinzo Abe. Japanese equities have soared and the yen crumbled (until this week’s slight strengthening, at least) on hopes the BoJ will act more aggressively to end the deflation, which is widely blamed for crippling the economy.

The big plan is to push the BoJ into adopting a 2 per cent inflation target, double the 1 per cent goal it set last February. But given how badly it has missed that target, would 2 per cent really matter? Read more