UK: Deloitte Monday Briefing: The Rush To Risk

Last Updated: 22 January 2013
Article by Ian Stewart

Most Read Contributor in UK, August 2017

* In the last six months financial markets have been in "risk on" mode. Some commentators have dubbed it a "dash for trash". Despite an uncertain economic backdrop risky financial assets have prospered at the expense of safe ones.

* Since last June US Treasury bonds, widely seen as one of the ultimate safe assets, have fallen by 1% while US equities have risen by 17%. In the currency world the usual safe havens of the US dollar, the yen and the Swiss franc have lost ground to the euro in recent months.

* By and large the riskiest assets have seen the greatest increases in value. High yield UK corporate bonds have returned 26% since June while UK government bonds have fallen by 2%. As the FT noted last week, "investors in the part of the...¬global corporate bond market with the highest chance of default are being paid one of the slimmest premiums over "safe" government debt for taking that risk since the boom that preceded the 2008-09 financial crisis".

* Spanish, Italian, Greek, Portugal and Ireland equities have outperformed German, Chinese, US or UK equity markets, helped by a growing perception that the ECB will do whatever it takes to keep the single currency together.

* The debt of peripheral euro area countries has risen sharply in value, with Greek government debt up 274% since June.

* The conventional wisdom is that macro uncertainty favours large, diversified businesses. Yet in the last year shares in small, quoted companies have outpaced large cap companies across most of the industrialised world, including the UK.

* Sectors which benefit from stronger GDP growth have done well. In the last six months UK consumer services companies, financials and travel and leisure businesses have seen bigger share price gains than defensive sectors including energy, utilities and pharmaceuticals.

* Last week Bloomberg reported that three of the top five performing US hedge funds in 2012 had invested in mortgage securities, one of the assets at the heart of the US credit crunch in 2008/09.

* In what some interpret as a sign of the times, Societe Generale's famously bearish investment strategist, Albert Edwards, last week said there was a "once in a lifetime" opportunity to buy European stocks.

* Investors seem to be increasingly confident that policymakers will avert another global meltdown. The last 6 months have seen the launch of a wave of new measures across the world designed to keep growth going. The ECB has said it is ready to buy at-risk government bonds without limit. The US and UK have undertaken further rounds of Quantitative Easing. Japan and China have loosened monetary policy. In the last few weeks America has managed a temporary fix to its debt crisis, Japan's new government has announced a huge public spending programme and the Basel III rules for bank capital have been eased.

* The fact that the market has liked what it has seen does not necessarily mean the global economy is out of the woods. The market changes its mind. 2010, 2011 and 2012 saw big equity selloffs triggered by bad news from the euro area. In 2011 the US debt crisis playing a major supporting role in the selloff. On each occasion equities bounced back as hopes that policy action from central banks and governments would keep growth going.

* Today's "risk on" phase could be derailed by another bout of bad news from the euro area, the US or dozens of other sources.

* The hope is that the risk rally signals an improving outlook for the global economy. Policymakers see financial markets as a vital channel through which easier policy is transmitted to the real economy – in the form, for instance, of cheaper and more plentiful credit or rising demand for risky assets.

* Today's rally has not so far been accompanied by an improving economic outlook. Global growth forecasts have fallen over the last six months and business confidence is weaker than financial market confidence.

* It may be that the current rally has more to do with a perceived reduction in the risk of catastrophic economic shocks – such as the breakup of the euro or a US default – rather than an improving outlook for growth. History demonstrates the performance of financial markets and economies do not move in lockstep.

* Stronger financial market risk appetite should be positive for economic activity. But is not the sole or most important determinant of growth. And, as the last five years demonstrates, such rallies are vulnerable to setbacks.


UK's FTSE 100 ended the week flat.

Here are some recent news stories that caught our eye as reflecting key economic themes:


* The head of the International Monetary Fund (IMF) Christine Lagarde said she sees the "beginnings of recovery" in the Eurozone – euro crisis

* The World Bank downgraded its forecasts for global growth in 2013 to a "relatively weak" 2.4%, from a previous estimate of 3.0% growth, citing a slowdown in developed economies – slowdown

* The German economy grew by 0.7% in 2012, down from 3.0% growth in 2011, according to preliminary figures from the federal statistics office – slowdown

* Weekly applications for US unemployment benefit fell to their lowest level in 5 years – US unemployment

* 954,000 new homes were built in the US in December, a 12.1% monthly rise and the highest monthly 'new starts' rate in 4 years – US housing growth

* The US S&P 500 stock market rose to its highest level in 5 years on the back of better-than-expected housing and employment data – bull market

* New car registrations in 2012 fell 8.2% in the European Union, reaching their lowest level since 1995 – slowdown

* UK car production rose 9% in 2012, with exports rising by 8% to reach a record high, despite a deep slowdown in European vehicle sales – UK auto boom

* DVD rental firm Blockbusters and media retailer HMV both entered administration – high-street stress

* The Japanese stock market – the Nikkei – closed at its highest level in almost 3 years after the government and Bank of Japan announced plans to boost economic growth – Japan

* Ratings agency Fitch warned that failure to raise the American debt-ceiling in a "timely" manner would put the United States' credit rating under a formal review – debt-ceiling

* Germany's central bank announced that it will bring back to Germany £125bn worth of gold bullion it currently stores in the US and France by 2020 – gold on the move

* The Greek parliament approved new tax measures that include an increase in the top rate of tax and the closing of loopholes, aimed at increasing government revenue by €2.5bn in 2013 and 2014 – Greece

* The price of salad has risen considerably in parts of America due to adverse cold weather damaging crops, with the prices of romaine lettuce nearly tripling in a year – soaring salad

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.