Jean-Michel Paul, Columnist

Expect Rising Volatility in These Three Areas

Credit markets, M&A and insurance are the sectors to watch as easy money ends.

February 23, 2018 at 6:00 AM UTC

Jean-Michel Paul is founder and chief executive of Acheron Capital in London and faculty member at the Solvay Brussels School of Economics and Management.

Not-so-calm markets.
Photographer: Daniel Acker/Getty Images

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A global cyclical recovery is putting pressure on central banks to accelerate the tapering of quantitative easing. As they do so, look for volatility in three areas where a prolonged period of easy money has resulted in the most blatant misallocation of resources: credit markets, M&A activity and the insurance market.

Start with the credit market. Historically low interest rates have had the unintended consequence of keeping 'zombie' companies afloat, as the OECD and others have noted. But leverage has also increased across the board. According to the Bank of International Settlements, advanced economies now have total debt in excess of 250 percent of their combined GDP, up from around 100 percent at the end of 2007.