You wouldn’t necessarily think that Ms. Yellen and Mario Draghi could be a good match for Putin and the Islamic State thugs, but incredible things are happening in the markets.
The geopolitical situation in Europe is as at least as bad as at the time of the Soviet-Afghanistan war: Russia and Ukraine are at war, the Arab world is upside down, from Libya to Egypt, from Syria to Afghanistan, even ignoring little Gaza, the situation is literally explosive. Old strongmen have been replaced by bloodthirsty fanatics with huge resources and even larger ambitions.
In the middle of this mayhem, you would expect the markets to worry, right? Wrong. The markets are now in an incredible situation where bad news is good news. Meaning, the more bad news the longer the central banks will continue to accommodate, which is bullish for asset prices. The question is when this mechanism will end.
Until then, investors seem to load up on all asset classes, with negative Eonias, Italy trading through Treasuries and London and New York property prices on a one-way street.