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Global Shocks

An Investment Guide for Turbulent Markets

  • Nicholas P. Sargen

Table of contents

  1. Front Matter
    Pages i-xvii
  2. Investment Challenges in a High Inflation Era

  3. Easy Credit Breeds Asset Bubbles and Instability

    1. Front Matter
      Pages 89-89
    2. Nicholas P. Sargen
      Pages 107-120
    3. Nicholas P. Sargen
      Pages 121-135
    4. Nicholas P. Sargen
      Pages 171-183
  4. Back Matter
    Pages 185-192

About this book

Introduction

How should investors manage portfolios during crises?  This question has surfaced since the 2008 global financial crisis, which is the latest of a series of shocks that began in the early 1970s.  While crisis situations offer opportunities to outperform markets or to be engulfed by them, little has been written to guide investors when markets are not functioning normally. 
 
This book, which is written from a practitioner’s perspective, fills the void by providing the reader with a toolkit and guiding principles to manage money when markets are in turmoil. It features ten case studies beginning with the breakdown of the Bretton Woods fixed exchange rate system through the current situation in which investors are assessing whether China could become the next bubble. Each chapter discusses how the respective crisis or bubble unfolded at the time, the way policymakers and markets responded, and the optimal strategy for positioning portfolios.The goal is to share these experiences and the lessons from them, so investors will be better prepared for future shocks. The opening chapter explores whether there are common patterns in movements of interest rates and exchange rates that investors can exploit.  A conceptual framework is presented that helps explain why this is the case for traditional currency crises, but less so for asset bubbles.  

The concluding chapter ties the episodes together and considers how the nature of financial crises has evolved since the collapse of Bretton Woods. We cite factors that make it difficult for policymakers and investors to detect problems in advance of an asset bubble. The good news is investors get a second chance to outperform when markets are over-sold; however, they need to formulate a strategy to limit the damage during the sell-off phase and to capitalize on the eventual recovery.  

Keywords

Investing Markets Market instability Crisis Bubble

Authors and affiliations

  • Nicholas P. Sargen
    • 1
  1. 1.Fort Washington Investment Advisors CincinnatiUSA

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-319-41105-7
  • Copyright Information The Editor(s) (if applicable) and The Author(s) 2016
  • Publisher Name Palgrave Macmillan, Cham
  • eBook Packages Economics and Finance
  • Print ISBN 978-3-319-41104-0
  • Online ISBN 978-3-319-41105-7
  • Buy this book on publisher's site
Industry Sectors
Finance, Business & Banking