- January 6, 2022
- Posted by: Stratford Team
- Category: Economy
Will 2022 go down in financial history as the year the music stopped? After the extraordinary buoyancy in markets in 2021 the risk of a painful downturn is certainly escalating.
In weighing that risk, investors face one overwhelmingly uncomfortable fact — central banks continue to rig the markets through their asset purchasing programmes, with important consequences for private portfolios.
The expansion of central bank balance sheets started as a response to the great financial crisis of 2007-09 and accelerated when the pandemic struck in March 2020.
This monetary activism perpetuates a looking-glass world where supposedly safe assets such as index-linked government bonds yield a negative income.
While they may remain safe in the sense that they offer liquidity, they are nonetheless toxic because they ensure a guaranteed loss if the investment is held to maturity. At the same time, most nominal government bonds currently show a negative real yield…
