Spreadex Market Update
FTSE 100 edges lower
U.S stock futures are in the red again, signalling a further retreat after last week’s considerable losses. Whilst a slowdown in the Japanese economy has been cited as a reason behind the sell-off, the realisation that the Fed will most likely trim their monthly bond purchases to $65 billion when they next meet to discuss monetary policy on Sept 18th has begun to take its toll.
Whilst bond investors seek to predict when the Fed will reduce its unprecedented monetary stimulus, riskier parts of the debt market are booming like before the financial crisis. The amount of loans made this year that lack standard protections for lenders exceed the all-time high set in 2007.
While Fed policy makers say employment and inflation will be the primary determinants of when and by how much they reduce the $85 billion a month being pushed into the economy every month through bond purchases, signs of excessive risk-taking are likely to also play a part. With the Fed failing to meet its mandates with respect to employment and inflation, risk management has taken a more central role, as opposed to a sole focus on economic data.
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