The herd is thundering back into risk-taking. The sudden improvement in investors’ sentiment has come as the Fed has reversed its policy of five years, and started to expand its balance sheet again. It did this to restore liquidity to the repo market, where banks raise their short-term funding, and the Fed has protested repeatedly that this is not a return to “QE” asset purchases to boost the economy. For all these protestations, the market has treated it as a turning point.
We discuss these developments; looking ahead for potential risks and how London & Capital is adjusting asset allocation accordingly.
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