Europe: A Shifting Geopolitical Landscape
The financial recovery is not getting as much traction in Europe as it is in the U.S., says Keith Wade, Schroders' chief economist. “The weakness in growth there is creating political unrest,” he says, citing the recent Italian election.
“That’s an area where capital markets in general, not just ours, could be very susceptible to some shocks because of the either lack of government policy or misguided government policy” says Rick Rezek, manager with STW Fixed Income Management.
Japan & Monetary Policy
“One of the key risks that I think people don’t talk about enough is that the BOJ [Bank of Japan] is actually successful,” Barrineau says. “It they produce inflation, nobody wants to buy JGBs [Japanese government bonds] and all of a sudden you’re in completely uncharted territory where yields rise in Japan.”
Rezek called Japan’s recent monetary-easing measures “quantitative easing on steroids.” Further, the country’s aggressive target for 2 percent inflation means it’s likely we’ll see the Yen dip lower.
“It takes a very small rise in yields in Japan to make what is a mathematically unsustainable picture over a decade become a mathematically unsustainable picture over two years or less,” Barrineau.
