Enjoy Your Long Weekend
US buy-backs to the rescue
Risk conditions have deteriorated faster than we expected and the deterioration has been led by the US, which is unusual. The excess volatility of US Equities relative to Treasuries has experienced the sharpest three-month increase in the last 22 years, including the run-up to the GFC. The current correction could well be as bad as early 2016. To end it, we may need the Fed to take a time-out on the June rate-hike. We will certainly need US corporates to resume their buy-back programmes as soon as the earnings timetable allows. Apart from Emerging Markets, buying the dip in international equities, without doing the same in the US, is not an attractive strategy.