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The latest Market Driver report from Wilshire, an index provider, shows the divide that has begun to dominate markets.

Investors are starting to believe policy makers in the US will not be able to raise interest rates to the extent they would like as economic conditions deteriorate. 

The US has actually had two consecutive quarters of negative GDP growth this year to date. In Britain and Europe that is the standard definition of a recession, but US policy makers use a wider measure.

According to Wilshire, rates not rising by as much is perceived as being key to the stronger equity market performance of the past month. 

US high yield has also benefited, as investors contemplate the prospect of lower than expected interest rates keeping default rates low.

Copper also recovered strongly over the month, while the fact small cap globally outperformed relative to large cap indicates there was some element of cyclicality in the equity rally that happened in July.

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