Pretty Much Everything is Now a Bet on the Central Banks of the World

Let our journalists help you make sense of the noise: Subscribe to the Mother Jones Daily newsletter and get a recap of news that matters.

Via the Financial Times, here’s an interesting bit of color coded data from HSBC Global showing the level of correlation between various asset classes. The version on the left is from 2005, and it shows about what you’d expect. Deep red means a pair of asset classes are highly correlated — that is, when one goes up or down, the other moves in the same direction — and the red square at the top left represents various U.S. stock market indexes. Unsurprisingly, when the NASDAQ goes up, so do the Dow Jones and the S&P 500. The red square next to it is European stock markets. And the red square at the bottom represents corporate and government bonds. When one kind of bond moves up or down, so do all the rest.

No surprises there. But take a look at the version on the right from April 2012. Practically everything in the top half is moving together. At the bottom right, bonds are moving together even more tightly than before. And stocks and bonds (bottom left) are moving tightly in opposite directions. There’s a bit of stuff in the middle that’s not correlated with anything else, but that’s all.

What this means is that it’s hard to diversify a financial portfolio these days because everything is moving in sync. HSBC’s view is that this is because the world economy is in such fragile shape that basically everything now depends on how well governments cope. If they cope well, the global economy will recover smartly and pretty much all asset classes will do well. If they cope poorly, everybody and everything is screwed. In other words, when you buy an asset these days — any asset — you’re not really making a bet on the asset itself. You’re making a bet on how well the governments and central banks of the world handle the current economic mess. No wonder everyone’s so nervous. There’s no escape from the Great Recession.

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. It's our first time asking for an outpouring of support since screams of FAKE NEWS and so much of what Trump stood for made everything we do so visceral. Like most newsrooms, we face incredibly hard budget realities, and it's unnerving needing to raise big money when traffic is down.

So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

IT'S NOT THAT WE'RE SCREWED WITHOUT TRUMP:

"It's that we're screwed with or without him if we can't show the public that what we do matters for the long term," writes Mother Jones CEO Monika Bauerlein as she kicks off our drive to raise $350,000 in donations from readers by July 17.

This is a big one for us. So, as we ask you to consider supporting our team's journalism, we thought we'd slow down and check in about where Mother Jones is and where we're going after the chaotic last several years. This comparatively slow moment is also an urgent one for Mother Jones: You can read more in "Slow News Is Good News," and if you're able to, please support our team's hard-hitting journalism and help us reach our big $350,000 goal with a donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate