Does the Divergence of stock prices and bond yields spell trouble for the world economy?

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landlord

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Stock prices for many of the world indices for example the FTSE and the DOW are approaching all time highs, suggesting confidence in the world economy.

However money is also piling into what many consider a safe haven asset.....bonds, US, Japanese and even UK, suggesting investors fear of a market downturn. The yield curve is flattening, which happened just before the crash of 2000 and 2008. Gold and silvers incredible breakout this year also seems to back up this fear.
When looking at US stocks, which are close to all time highs and comparing corporate earnings which are declining, price to earnings ratios are not heading in the right direction. Then there's world debt to GDP ratios, the European banking crisis (specifically Deutsche bank), Brexit uncertainties, etc.....

It seems to me very odd that money would be flooding into stocks, bonds and gold simultaneously.......surely something has to give.

I know what my money is on.........
 
Maybe it's not money your money is on, maybe the worst asset of all to hold is cash, at the moment the best cash to hold is us dollars, but that's only since 2012, anyway the US dollar never regained the heights it reached in the late 90s. In 2000 precious metals reached their all time low, in 2008 they climbed along with every other asset to reach multi year highs but then also crashed along with every other asset. When you ask the question that every asset is rising and maybe something has to give, maybe that asset is cash whether denominated in dollars, euros or sterling, maybe that is the toxic asset
 
landlord said:
Stock prices for many of the world indices for example the FTSE and the DOW are approaching all time highs, suggesting confidence in the world economy.

However money is also piling into what many consider a safe haven asset.....bonds, US, Japanese and even UK, suggesting investors fear of a market downturn. The yield curve is flattening, which happened just before the crash of 2000 and 2008. Gold and silvers incredible breakout this year also seems to back up this fear.
When looking at US stocks, which are close to all time highs and comparing corporate earnings which are declining, price to earnings ratios are not heading in the right direction. Then there's world debt to GDP ratios, the European banking crisis (specifically Deutsche bank), Brexit uncertainties, etc.....

It seems to me very odd that money would be flooding into stocks, bonds and gold simultaneously.......surely something has to give.

I know what my money is on.........
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another alarm bell for me is the massive divergence between banking stocks and the overall market , while the S+P is a whisker from all time highs , even the main american wall st banks are massively down on where they were even twelve months ago , no sector is as interconnected as banks globally , american banks are on the floor due to overseas fears

they often say that if stock markets are down sharply today , the overall economy will be in trouble in six months or a year , european bank shares are not much higher than during the debt crisis of late 2011 - early 2012 , bank of irelands share price is where it was more than three years ago , could this be a sign that the irish economy is headed for trouble soon ?
 
joe sod said:
Maybe it's not money your money is on, maybe the worst asset of all to hold is cash, at the moment the best cash to hold is us dollars, but that's only since 2012, anyway the US dollar never regained the heights it reached in the late 90s. In 2000 precious metals reached their all time low, in 2008 they climbed along with every other asset to reach multi year highs but then also crashed along with every other asset. When you ask the question that every asset is rising and maybe something has to give, maybe that asset is cash whether denominated in dollars, euros or sterling, maybe that is the toxic asset
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no sign of inflation at the moment so i doubt cash is all that toxic
 
There maybe no sign of inflation yet!, but with so much cash lying uninvested in bank accounts, with central banks out doing each other by money printing and competitive devaluations, is it really wise to be sitting in cash. By all means you should have a certain proportion in cash with the uncertainty. As for me I still have a sizeable proportion in cash anyway about 20% of liquid assets. After the big move in sterling maybe not a bad idea to move more cash into sterling
 
joe sod said:
There maybe no sign of inflation yet!, but with so much cash lying uninvested in bank accounts, with central banks out doing each other by money printing and competitive devaluations, is it really wise to be sitting in cash. By all means you should have a certain proportion in cash with the uncertainty. As for me I still have a sizeable proportion in cash anyway about 20% of liquid assets. After the big move in sterling maybe not a bad idea to move more cash into sterling
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world is drowning in debt , bar the very wealthy , most people in europe and the usa are doing worse than they were ten years ago , can people afford to invest in the stock market ?
 
Yes there is alot of debt out there but the strange thing is that their is a willingness to invest in it at such low and even negative interest rates. Also the size of the worlds derivatives markets are now colossal. In that environment surely buying into that debt market is crazy. It seems strange that buying a bond that pays virtually nothing is seen as the safe option whereas buying a share in a productive company is seen as very risky. The debt market has doubled since 2000 yet global stock markets are still where they were in 1999
 
joe sod said:
Yes there is alot of debt out there but the strange thing is that their is a willingness to invest in it at such low and even negative interest rates. Also the size of the worlds derivatives markets are now colossal. In that environment surely buying into that debt market is crazy. It seems strange that buying a bond that pays virtually nothing is seen as the safe option whereas buying a share in a productive company is seen as very risky. The debt market has doubled since 2000 yet global stock markets are still where they were in 1999
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we,ve been in a bull market in bonds for more than thirty years now
 
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