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Uneasy Calm

Flush with cash, institutional investors are paying a high price for a cheery consensus. Those lining up for a fire sale may not have to wait too long


How many traders does it take to send the Dow Jones Industrial Average (DJIA) plunging 650 points? None, just a tweet from Donald Trump is good enough. Welcome to the new normal. Earlier only central bankers moved markets, now politicians do too. And presumably the worst or maybe the best is yet to come. Cohesive not to mention excessive expansionary measures by central banks have kept markets buoyant globally. Much of what is happening does not make sense any more as investors are willing to pay more and more for the same level of growth (See: More for less). Sarah Ketterer, co-founder, Causeway Capital which has $53 billion under management, is confounded by the 15% annual return that the MSCI USA Index has delivered over the past decade. “That return occurred with historically low levels of 10-year volatility. Abnormally high return should come with abnormally high risks. And the fact that the inverse has occurred, is an outcome of very strange monetary policy,” she says.