News this past week:
- Markets buoyed by central bank meetings
- Bond yields fall after US interest rates kept unchanged
- ‘Hard Brexit’ speculation pushes sterling lower
- Subdued PMI results for the euro area
- Choppy week for oil ahead of OPEC meeting
James Klempster (CFA) of Momentum Global Investment Management shares his view:
This month marks the eighth anniversary of the spectacular collapse of Lehman Brothers. At that time the global financial crisis was underway – we had already seen runs on high street banks such as the UK’s Northern Rock by then – but the fall of a Wall Street titan sent shockwaves around the globe and served to highlight the scale of the liquidity and confidence drought that was upon us. The fact that Lehman went out of business taught market participants that even institutions that had been believed to be ‘too big to fail’ may well go under. Following the Lehman collapse, market liquidity all but dried up as lenders looked to both ensure their own balance sheet was sufficiently stable and to avoid lending to others because this was beginning to look like taking an unnecessary risk. As a result, yields of safe haven assets shot lower whereas the yield spread payable on corporate and personal debt spiked upwards reflecting the increased risk perception.