The Absolute Return Letter, October 2014 – Six Months of Nothing

The Absolute Return Letter is back – regrettably to a more unsettled world than we experienced in March when we last wrote. So far Europe has been slow to react to policy initiatives, and it is no longer unthinkable that the Eurozone will experience a re-run of the Japanese nightmare – deflation.

Political problems have also escalated over the past seven months. Russia has been aggressive and so have extremists in certain Muslim countries. Having said that, financial markets seem to care about nothing but QE. Despite a growing disconnect in some markets between equity valuations and economic fundamentals, we expect the low interest rate environment to carry the equity bull market for a little longer, but eventually it will end in tears.

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