Spring Rally in Stocks, Bonds, Gold and Bitcoin Unnerves Investors – Ben Eisen June 6, 2017 8:05 p.m. ET


Assets don’t usually rise or fall in unison

Gold has gained following terror attacks in the U.K.

Gold has gained following terror attacks in the U.K. Photo: neil hall/Reuters

Stocks, bonds, gold and bitcoin—assets that rarely move in unison—have all been surging this spring, an everything rally that leaves investors confounded about how to play the plodding U.S. expansion and vulnerable to sharp reversals in fortune.

Major U.S. stock indexes have soared to records this month, reflecting some investors’ confidence in the continued U.S. economic recovery along with expectations that large technology firms will accrue further market-share gains. At the same time prices of bonds, which often decline when stocks are rising, have risen lately, as U.S. inflation readings cooled off alongside a slowdown in some key industries.

Gold has gained following terror attacks in the U.K., and turmoil in U.S. politics centering on the administration’s legislative prospects and a key congressional hearing this week featuring former FBI director James Comey.

The simultaneous gains have begun to concern some investors. Many point to a wave of money that is driving up asset prices, tied in part to lower bond yields and a lower dollar—a confluence of events they say feels good while it lasts but can’t go on forever.

“We do think there are distortions” in the markets, said Iman Brivanlou, who oversees high-income equities at asset manager TCW Group Inc.

The Dow Industrials this month have posted two record closes, their first since March, and the 30-stock index remains just 0.33% below its all-time high despite a decline Tuesday of 47.81 points to 21136.23.

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Asset Bubbles From Stocks to Bonds to Iron Ore Threaten China – By  John Lyons and  Shen Hong Updated Oct. 31, 2016 11:12 p.m. ET


Investment binge fueled by easy credit and fiscal stimulus increases volatility; prices surge, then slide

Workers in Shenzhen, China, move materials at a construction site in August. The city had the world’s largest increase in apartment prices last year, a sign of China’s housing bubble.

Workers in Shenzhen, China, move materials at a construction site in August. The city had the world’s largest increase in apartment prices last year, a sign of China’s housing bubble. Photo: Qilai Shen/Bloomberg News

A succession of asset bubbles has formed in China, caused by a torrent of speculative money sloshing from stocks to bonds to commodities.

The biggest apparent bubble is in housing, but prices have surged for niche assets, too, such as calligraphy, antiques and art. In May, futures prices for soybean meal, used as pig feed, jumped 40%. The trading volume of 600 million tons was nine times higher than China’s annual consumption. The pipe-making material PVC is up 40% so far this year on the Dalian Commodity Exchange.

The world’s second-largest economy is slowing. Easy credit and successive fiscal stimuli, designed to keep China aloft, mean it is awash in money that is chasing an increasingly small number of investment opportunities. China’s money supply has quadrupled since 2007, and the new cash is largely trapped inside the country by government capital controls.

“There are very few places left to invest in the real economy, so the money goes into the so-called virtual economy,” said Yang Delong, chief economist at First Seafront Fund Management Co., which manages $6 billion and is based in the manufacturing hub of Shenzhen. First Seafront has sharply cut its stockholdings in the past year and shifted toward bonds and commodities.

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