How do you asses the recent move in credit markets: a correction or a cycle reversal?
Eric BRARD: The corrections in the credit markets (Europe and the US) have the same roots as those which affected the equity markets: the broken circle “low growth/low inflation/low rates/ pervasive Central Banks (CB)” entails a repricing of the whole financial assets spectrum. Stronger growth, with now rising inflation has resulted in higher rates and CB starting to tighten policy. Hence, the price correction of assets that had benefited most from the years of risk blindness and cash abundance.
That said, we qualify these new price actions as corrections, not as a cycle reversal. The causes are clear: stronger growth and higher inflation (but not hyperinflation).