The surprisingly chilled bear market
This year’s bear market has been “epic” in depth and breadth. But aside from the mess in fixed income markets, it has also been remarkably orderly. Why has stock market volatility been so low? It might not always be obvious, but in terms of both realized and implied volatility, the 2022 rout has been remarkably subdued. In other words, equity markets have deflated steadily like a balloon held in place, rather than a punctured one let loose to fly. (Financial Times | Oct 25) see also The bear hasn’t broken passive yet (Financial Times | Oct 25)
US economy grew 2.6% in third quarter, GDP report shows
The U.S. economy grew at a 2.6% annual rate in the third quarter but showed signs of a broad slowdown as consumer and business spending faltered under the weight of high inflation and rising interest rates. Gross domestic product – a measure of goods and services produced across the nation – increased after declining in the first half of the year as the trade balance boosted growth, the Commerce Department said Thursday. (The Wall Street Journal | Oct 27)
US SEC adopts executive compensation clawback rules
The US Securities and Exchange Commission on Wednesday voted to adopt new rules that will require companies that restate their financials due to compliance lapses to claw back excess compensation from their executives. The rule, which Congress mandated following the 2007-2009 financial crisis, was left unfinished in 2015, but was revived by the SEC under Chair Gary Gensler last year as part of a broader effort to crack down on corporate malfeasance by strengthening the agency's tools for penalizing executives. (Reuters | Oct 26)
Pension fund appetite for commercial real estate is fading fast
U.S. public pension funds, after pouring new money into commercial real estate at a record rate during the first half of the year, are cooling fast on the sector and cutting back on new investments. These retirement funds made $32.6 billion worth of new financial commitments to office buildings, warehouses, hotels and other commercial properties during the first six months of 2022. Those investments, made through financial firms and funds, were up nearly 40% from the same period in 2021. (The Wall Street Journal | Oct 25)
Fed is losing billions, wiping out profits that funded spendingProfits and losses aren’t usually thought of as a consideration for central banks, but rapidly mounting red ink at the Federal Reserve, and many peers, risks becoming more than just an accounting oddity. The bond market is enduring its worst selloff in a generation, triggered by high inflation and the aggressive interest-rate hikes that central banks are implementing. Falling bond prices, in turn, mean paper losses on the massive holdings that the Fed and others accumulated during their rescue efforts in recent years. (Bloomberg Economics - Central Banks | Oct 25)
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