Newsletter dated September 9, 2016

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Global Financial markets have been quiet since our last report. All major indices are virtually at the same level as two weeks ago. Volatility indices around the world are near record lows.

Interest rates have been stable, US Fed is still hesitating regarding further rate hikes, ECB just remained interest rates unchanged and Bank of England will continue monetary easing even when facing inflation over 2% which will be imported by the weak British Pound. Global economic data are nearly unchanged too.

So will volatility go to zero from here? Of course not. There are plenty of events that might turn out to be a spark for a market correction. Chinese foreign currency reserves have dropped to a new low since 2011, Saudi projects will be cut by USD 20 billions and we are just experiencing the largest container line bankruptcy in history. The latter one is caused by Hanjin Shipping operating 98 container ships plus bulk shipping and 11 ports worldwide. As a first result you can observe container shipping rates doubling within few weeks from a depressed level. See our chart of the day! As the next step you will find fallouts in the global supply chain affecting other companies due to Hanjin container ships that will neither be loaded nor unloaded during or cannot even enter ports during financial restructuring. Will is cause a chain reaction?

Erwin Lasshofer and his INNOVATIS team do not think so. However such an unexpected event will be the catalyst that can put markets at fear mode again one day. Currently we see not threat for a major shift. However the upside will be limited by US Fed either. In this environment we see good opportunities for structured products and avoid undue risks.