📑 Research Notes for 2022-06-20
This week, we look at the Fed's effect on financial assets, if the Fed should buy equities, China's own "special military operation", and the rise in JGB yields.
We conduct extensive investment research and share the most interesting content that we come across every week. Here is a curated list of this week’s top observations.
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Fed Risk Drubs Stocks; Dollar, Bond Yields Soar.
World stocks fell for a second day in a row on Tuesday while government bond yields and the U.S. dollar clung to multi-year highs, as surging inflation led investors to brace for what could be the largest U.S. interest rate hike in 28 years this week.
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Yellen Says The Fed Doesn’t Need to Buy Equities Now, But Congress Should Reconsider Allowing It.
Normally, the Fed is only allowed to own government debt and agency debt with government backing, but the central bank has also received special powers during the coronavirus outbreak to buy other assets such as corporate debt through exchange-traded funds. Former Federal Reserve Chair Janet Yellen thinks the central bank is not in a position where it needs to buy equities but thinks lawmakers should give it more leeway for the future.
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Fears For Taiwan As China Lays Groundwork For Its Own ‘Special Military Operation’.
Chinese President Xi Jinping has signed a directive allowing for “non-war” uses of the military - raising concerns it could pave the way for an invasion of Taiwan that would be labelled a “special military operation” instead of a war, just as Russia has done in Ukraine.
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Another ‘Stable’ Currency Peg Is Falling, But This Time It Looks Like It Might Vindicate Crypto Bulls.
The peg in question is the Bank of Japan’s self-imposed ceiling on the benchmark 10-year government bond that restricts the yield investors earn to no more than 0.25%. This helps pin down borrowing costs across the broader economy and support growth.
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Last Week’s Market Performance Heatmap
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Curated by Joseph Lu, CFA®
Joseph is the founder and managing director of Conscious Capital Advisors and a CFA® Charterholder.
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