The CrossBorder Capital Blog

  Asset Valuations and Cross-asset Correlations Are All About …. Deflation and Social Media!   The latest market panic and fears over recession and growing deflationary pressures encourage us to dig into our research archives. The market may be over-reacting, but it’s clear from history that the biggest threats to financial markets come in deflationary periods. If the coronavirus shock proves sufficiently deflationary, equity valuations could collapse by more. The key takeaway is that modest inflationary periods favour equities, but, providing that inflation remains below around 6%, bond and equities together offer great hedges against unexpected Risk-On and Risk-Off shocks.    

The Debt Virus That Threatens The World Economy   The Coronavirus panic has once again exposed the fragility of the World’s financial system. The problem is too much debt, probably relative to GDP (i.e. solvency risk) and almost certainly relative to liquidity (i.e. re-financing risk). The only remedy is to off-load private sector debt through looser fiscal policies, but the near-term fix requires more liquidity, namely QE.       See our latest published research, Global View - The Debt Virus That Threatens The World Economy -   March 2020   Please find either a link to our website, or an email attachment.  For further information, or to change user options, please contact us at crossbordercapital@liquidity.com          ———————————————————————...