MyStratWeekly – October 10th 2022

Topic of the week: When the ECB and the Fed lose (a lot of) money

• The ECB, like the Fed, has a very large portfolio of government securities. With the rate hike this year, the value of this portfolio has fallen by several hundred billion, according to our estimates;
• Paradoxically, we think this is a minor problem;
• On the other hand, the rise in rates will have a significant impact on the level of profitability of the central banks, thus on their retrocession to the Treasury. And in terms of the cost of servicing the debt, it changes everything and creates an unprecedented rate sensitivity.

Market review: Hoping for Fed pivot is dangerous wishful thinking

• Short-term respite for markets at start of fourth quarter;
• Fed officials reaffirm need for tighter policy;
• OPEC cuts outputs by 2mbpd, adding to inflation worries;
• Euro swap spreads under renewed pressure.

Stéphane Déo's podcast

• Is the issue of European common debt to fight energy problems a game changer?
• Doesn’t the UK example show that reopening EQ is inevitable?
• What to expect from the results season?

Chart of the week

The trend over the last two centuries is very clear and very encouraging. Democracy has undoubtedly progressed, with more than a third of the world’s population now living in countries with democratic political models.
A more precise view, unfortunately, gives a more worrying trend, over the past decade, the trend has reversed. Several countries have left the list of democracies, including Turkey and India