Mega Themes

In this Insight, we discuss the currency and bond market implications of last week’s ECB and Bank of Japan policy meetings. The conclusion: the ECB is on a path to an overly hawkish policy mistake, while the Bank of Japan’s dovish stance is growing more unsustainable.

In this Insight, we discuss the currency and bond market implications of last week’s ECB and Bank of Japan policy meetings. The conclusion: the ECB is on a path to an overly hawkish policy mistake, while the Bank of Japan’s dovish stance is growing more unsustainable.

Investors are still cautious and have significant cash that needs to be put to work. Trickle-down of it into the US equity market may extend the rally. Overly bearish futures positioning is also a strong contrarian indicator. Disinflation is good for real earnings growth, and imminent earnings rebound may add support for equities.