To: carranza2 who wrote (163657 ) 10/14/2020 6:07:04 AM From: TobagoJack Read Replies (1) | Respond to of 217736 ask-socrates.com BlogEarlier today we heard words of warning from the IMF concerning global stock markets. Tobias Adrian, Director of Monetary and Capital Markets Division, wrote that without continued coronavirus support packages, we could expect plunging equity markets as the punchbowl is removed. However, worth mentioning that this view has been circulating in many research notes since equity markets showed a direct correlation to these packages earlier in the year. As many European countries reimpose localized lockdowns and economic data fails to manage optimism, the realization starts to dawn on European investors that things may be less than rosy. Given this limp recovery in the core, it is only the DAX that has managed a historic close earlier in Q1 this year. When we compare this to the French CAC or FTSE it is concerning that the FTSE set it high back in 2018 whilst the CAC saw it twenty years ago. Above is the chart of BNP Paribas; probably the safest and most innovative core bank in Europe. As a point of disclose – I was a former employee but closed all ties as part of my severance in 2003. What I find concerning is the mismatch between index highs and the core banks' performance. When we map this stock against the CAC there is a minor mismatch of around two years (BNP to CAC). However, what I find more concerning is the mismatch between CAC and DAX, but even more surprisingly the gap between BNP Paribas share price and the DAX, both in performance and in time. There are many variables from financials, single stock, sovereign, capital flow to core, and then corporate to debt, but given currencies are aligned that reduces calculation. Ahead of the Euro many squeezed government debt spreads to core and derivatives were in their heyday. I question now are we witnessing the same today with the DAX and the Euro’s performance mimicking the peripheral to core spread. Many Europeans commented on how expensive things had become following the launch of the Euro. We have to question now, could we be hearing these same questions with the launch a digital euro! One school of thought is that the money is hiding in the core and that is the reason for the performance of the DAX. At least there are returns being paid which is a huge benefit when compared to the negative yields on offer for Bunds. Others may cheer the proactive response of the government whilst dealing with the virus. Whatever the reason, whether we see the digital introduction sooner rather than later, it does appear that wherever capital is hiding Europeans are still losing ground on the world stage as the flow of capital chases US stocks to even greater heights.