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Don’t Follow the Herd

newsletter_2016_02The reason for the stock market selloff isn’t fear of a recession, its that Sovereign wealth funds have been dumping stocks.
For years Central banks and Sovereign wealth funds, such as Norway, Abu Dhabi, China and Saudi Arabia, have bought up foreign currencies — such as the US dollar — to prevent their own currencies from rising too fast.

But now that oil has fallen from $100 to $30, Middle Eastern Sovereign wealth funds have been selling assets to fill the gap in the budget. Japan’s market has been one of the hardest hit, as have European banks, which are widely held by SWTs. The CEO of Nomura, Japan’s biggest brokerage firm, says investors can expect a “sharp rebound” once the SWF selling stops (Source: Financial Times).

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