![]() ![]() The Institute of International Finance’s Global Debt Monitor measured global debt at just shy of $300tn, or 350 per cent of GDP, in the third quarter of 2021. There may be even more tumult this time around.ĭebt burdens are now substantially higher. Timing is near impossible to get right without a modicum of good luck but if the Fed do embark on as aggressive a series of rate hikes and QT, as is looking likely, then at some point the probability of major market corrections across the board are likely. As this chart from the excellent Jim Reid of Deutsche Bank highlights, the last period of Fed tightening, in 2017/18, was followed by the highest ever proportion of asset classes recording negative total returns. Given what happened to assets the last time the Fed engaged in monetary tightening, one can appreciate why investors are jittery. By the end of the year, it might also shrink its vast balance sheet. ![]() Markets’ rocky start to the year owes more than a little to the expectation that the Federal Reserve might hike rates over the coming months.
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