A renewed struggle in store for risky assets

The boost to risky assets from QE3 may already be over. The prices of equities and commodities have generally fallen since mid-September. And while the ECB brought the euro-zone back from the brink in the summer with a conditional pledge to buy potentially unlimited amounts of government bonds, the Bank’s plan does not address troubled countries’ lack of competitiveness which has contributed to weak growth and excessive debt. We think tougher times lie ahead for risky assets. The global economy remains weak and we still expect the euro-zone to break apart. This should be good news for US Treasuries and gold, but not for German Bunds and the euro.