bullish
The Biggest Macro Risk You Might Be Ignoring
SUMMARY
- Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate how this probability distribution will move over time.
- In other words, you don’t need to be necessarily right on what happens next but just be able to grasp how market consensus will move from here.
- Ignoring this simple principle has been a very expensive exercise for European fixed income investors over the last few weeks: the-ECB-will-never-really-hike mantra is melting under the eyes of bond investors married to a dovish narrative which has been successful for a decade but offers a very bad risk-reward today.
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