Biggest Market Dislocations to Watch

Deutsche Bank identifies four major market dislocations where equity and credit prices have decoupled from energy shocks and central bank pricing. While equities and credit remain resilient, rates and inflation data suggest more persistent risks from the ongoing Iran conflict.

Key Takeaways

• 1.Equities have diverged from oil and interest rates, pricing in a temporary energy shock while yields suggest a more protracted conflict.
• 2.Market pricing for central bank actions is inconsistent, with the ECB expected to hike faster than the Fed despite the US having stronger growth and higher inflation.
• 3.Credit spreads for both High Yield and Investment Grade are tighter now than before the Iran conflict, ignoring negative growth revisions and energy shocks.

Table of Contents

• 1. US Treasury yields vs oil prices and equities divergence
• 2. Central bank pricing inconsistency
• 3. US and Europe HY and IG credit spreads
• 4. Longer-term inflation faith

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