Rising Geopolitical Tension Lifts Foreign Bond ETFs

Stocks, real estate securities, and high-yield bonds took a hit last week as saber-rattling between the US and North Korea triggered a moderate round of de-risking. The leading beneficiary from last week’s push into safe havens: foreign government bonds in developed markets ex-US. This slice of fixed income posted the biggest gain among the major asset classes for the five trading days through Aug. 14, based on a set of exchange-traded products. The biggest loser: US real estate investment trusts (REITs).
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Book Bits | 12 August 2017

Will China’s Economy Collapse?
By Ann Lee
Summary via publisher (Polity Books)
The recent downturn in the Chinese economy has become a focal point of global attention, with some analysts warning that China is edging dangerously close to economic meltdown. Is it possible that the second largest economy in the world could collapse and drag the rest of the world with it? Or will China simply implode under the strain of its many problems and recede from the world stage like Japan? Does it have the resilience and preparedness to tackle the multiplicity of economic challenges it faces? In this penetrating essay, leading expert on China’s economic relations Ann Lee explains why China’s economy will not sink us all and what policy options it is drawing on to mitigate against such a catastrophic scenario. Dissecting China’s economic challenges with realistic clarity, she makes a compelling case for China’s continued economic robustness in multiple sectors in the years ahead.
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Rising North Korea Tensions Threaten US Q3 GDP Outlook

The escalating threats of military action between President Trump and North Korea have put the world on edge, but a new survey of economists projects steady GDP growth for the third quarter. The initial Q3 report is more than two months away and so any estimates at this point are little more than guesses – all the more so in the wake of rising geopolitical risk. For the moment, however, the preliminary projections for economic activity assume that the pickup in growth in Q2 will hold steady if not improve in Q3.
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War Of Words Reignites Demand For Safe Havens

Economic news for the US has been encouraging in recent days, but rising tensions between the United States and North Korea have refocused the crowd’s attention on the potential for war. Predictably, President Trump’s blunt warning on Tuesday that North Korea faced “fire and fury” if it continued to threaten the US revived the appetite for safe havens, including Treasuries.
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Bubble Risk When The Bubble Doesn’t Burst

In February I considered if bubble risk for US stocks was elevated. My conclusion: Yes, it appeared that the market was unusually frothy, based on an econometric technique that takes a stab at quantifying the ebb and flow of irrational exuberance. As a sell signal, however, the analysis has been dead wrong this year. The S&P 500 is up more than 6% since that post appeared six months ago.
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