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We Don’t Need a Recession For a Reset in the Stock Market (A Wealth of Common Sense) Ben Carlson crunches the numbers and finds that 60% of double-digit equity market corrections take place outside of recessions. Therefore expect a big correction even if the US doesn’t formally enter a recession. [Bearish US equities]
Does The Return Of QE Mean Big Gains For Stocks In 2020? (Advisor Perspectives) Some argue that the stock market gains of the past 10 years were largely attributable to the massive expansion of central bank balance sheets. So the return of “QE-lite” by the Fed could be viewed as a positive for stocks. However, investors should be cautious. On a rolling 12-month basis, historic data shows no consistent relationship between central bank balance sheets and stock markets. Watch economic growth indicators instead. [Bearish US Equities]
Remain Selective on EM Debt (Variant Perception) This piece argues that the top performing EM debt markets will be those that have simulative monetary policies, but contained inflation. The markets that stand out are India, Mexico and Indonesia. [Bullish Selected EM Debt]
Leveraged Loans – History Rhyming? (In The Long Run) The article draws a parallel between GFC’s CDOs mismanagement and today’s leveraged loans build-ups (particularly CLOs products). Author argues that CLO asset quality is underestimated. [Bearish US Credit]