1 May 2014
Markets turning towards normalization- BAML
FXStreet (Guatemala) - Gustavo Reis, Global Economist at Bank of America Merrill Lynch explained the FED was dovish and put a floor under wobbling risk assets.
Key Quotes:
"Markets seem to be transitioning from liquidity- to growth-driven mode, but the pace feels uncomfortably slow. After all, it was the reassuringly dovish tone of FOMC Chair Janet Yellen that seemed to have put a floor under wobbling risk assets. Tapering or not, the Fed seems to have remained in the driving seat."
"However, an alternative view would cast the Fed in a supporting role. Early this year investors faced a growth scare, particularly in EM."
"But unlike in 2013, diminished tail risks rather than the perception of a more dovish Fed appear to have assuaged markets. It was a different stress test than last year's tapering tantrum, and the Fed indeed seems to be getting less press these days
"There are still meaningful downside risks to global activity, in our view, such as financial imbalances in China and the Ukrainian crisis. But global growth seems to have recovered from the new-year slowdown, and we believe a 2Q pickup in US growth will likely nudge markets along the path to normalization."
Key Quotes:
"Markets seem to be transitioning from liquidity- to growth-driven mode, but the pace feels uncomfortably slow. After all, it was the reassuringly dovish tone of FOMC Chair Janet Yellen that seemed to have put a floor under wobbling risk assets. Tapering or not, the Fed seems to have remained in the driving seat."
"However, an alternative view would cast the Fed in a supporting role. Early this year investors faced a growth scare, particularly in EM."
"But unlike in 2013, diminished tail risks rather than the perception of a more dovish Fed appear to have assuaged markets. It was a different stress test than last year's tapering tantrum, and the Fed indeed seems to be getting less press these days
"There are still meaningful downside risks to global activity, in our view, such as financial imbalances in China and the Ukrainian crisis. But global growth seems to have recovered from the new-year slowdown, and we believe a 2Q pickup in US growth will likely nudge markets along the path to normalization."