Citigroup Inc (NYSE: C) Warns Investors of Major Risk in Global Asset Markets
According to a recent news article, Citigroup Inc’s (NYSE: C) Chief Economist, Professor Willem Buiter warned investors to exercise caution in the asset markets as there is a risk of an overdue correction. Professor Buiter who is a leading theorist on monetary policy stated that investors should not chase the global stock markets blindly to new highs, but should be aware of the impending risk of a correction.
Citigroup’s Chief Economist warned investors of inherent risks in the market.
He identified risks posed by the end of QE and interest rate hikes.
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Market indicators such as the Volatility S&P 500 (INDEXCBOE: IVX) commonly known as the market ‘fear gauge’ have been trading at all-time lows, which is an indicator of the general complacency among investors. The IVX tracks the overall investor sentiment in the market in regards to their risk perception and its current low reading indicates that investors do not anticipate any inherent risks in the market.
Prof. Buiter warned investors of the risks associated with the tighter monetary policies approach being taking by most central banks such as the European Central bank, which might end its quantitative easing program this year. Other central banks such as the Federal Reserve are also advocating for tighter monetary policies such as raising interest rates, which could affect global asset markets negatively.
The tighter monetary policies being implemented by central banks led by the Federal Reserve, which is keen on normalizing its balance sheet to the tune of $50 billion a month by the end of this year, pose a major risk to global asset markets. Furthermore, an analyst from JPMorgan Chase & Co. (NYSE: JPM) also confirmed that global liquidity is in excess of $10 trillion, which is a measure of the excess M2 money beyond the needs of the real economy.
It is true that there is a slew of risks facing investors this year as central banks pursue tighter monetary policies, which could see an end to the constant flow of new money into global asset markets through the ‘Great Taper.’ Other risks facing global markets are related to President Donald Trump’s fiscal stimulus policies in the USA aimed at boosting the country’s economy, which could also have negative impact on US equity markets.
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