Bond Bulls are an Increasingly Rare Breed

ECONOMIC & MARKET BACKDROP: There is a growing sense of optimism in global economic commentary

Andy Brunner 11 February, 2013 | 5:41PM
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While still couched in fairly cautious terms, there is a growing sense of optimism in global economic commentary. This follows a year in which financial conditions and confidence were severely undermined by major “tail risks”, any one of which occurring could have derailed the global economy. Policy actions have averted any extreme outcomes and there is far less concern today that a euro breakup, a US fiscal debacle or a Chinese hard landing could occur this year. To be sure, none of these issues has been fully resolved but improving confidence is patently obvious when commentators begin to ask when the US Fed should consider taking away the punchbowl.

A comment from the BBC’s economics correspondent, Stephanie Flanders, perhaps best sums up the prevailing sentiment; referring to the annual World Economic Forum held last month in Davos, where central bankers, business leaders and politicians gather for four days to discuss and debate the challenges facing the global economy, she noted that Davos wouldn’t be Davos if people weren’t constantly talking about the need to avoid complacency – "but this was the first time in five years that there seemed a genuine risk of it breaking out".

During January, the IMF also produced its quarterly Update to the World Economic Outlook but, true to form, warned that "downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks". No complacency here then!

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK