Holidays often give you perspective. I write this blog post while enjoying a sunset looking out over the plains of the West Cape in South Africa. With calls for increasing fiscal leniency potentially growing louder, we believe that we are already on the way to helicopter money. If this proves to be the case, what could the implications be for different asset classes?
Over the past few weeks we have frequently debated the likelihood of 'helicopter money'. However, I have noticed that people tend to use the term to mean many different things. What some people call a helicopter, other people would hardly call a drone. In light of this I think it might be helpful to answer the question: what does helicopter money really mean?
Investors are in a massive search for carry as an increasing percentage of the bond markets is generating negative yields. This, amongst other factors, has fuelled huge inflows into emerging market debt (EMD). We are long hard currency EMD and the position has benefited from this search for yield. We wonder, however, has EMD now become too expensive?