The current market environment is characterized by rising corporate profits, rising yields on U.S. government bonds, but also by ongoing activities of the global central banks, which are permanently expanding their balance sheet totals by buying up securities.
Currently, market participants are discussing a possible return of inflation and possible key interest rate hikes, which may come sooner than analysts recently expected. This discussion arises because of the positive outlook specifically for the U.S. and because many central banks have had deflation risk on the agenda since the financial crisis in 2008. However, the U.S. Federal Reserve is not thinking of changing its key interest rates. Monetary policy will therefore remain unchanged for the time being, and key interest rates will thus remain at zero percent for the foreseeable future.
The clear overriding theme in the markets is the search for yield and an expected normalization of the economy. This is driving investors into asset classes that offer yields at a level that can compensate for losses in value due to inflation expectations.
Development of bond yields of US- and EUR-Government-Bonds and EUR-Corporate-Bonds
Development of bond yields of European High-Yield-Bonds compared with global High-Yield-Bonds and Emerging-Markets-Corporate-Bonds (3/2016-3/2021)
The development of historic yields is not a reliable indicator for future developments of a specific asset category or asset class. The charts above do not include any fees or costs.
Ratio-Overview (more information and all risk notes can be found at www.erste-am.com)
Prognoses are no reliable indicator for future performance.
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