Investor relations blog

Goldilocks bet

Despite the fact that the rising trend in both interest rates and inflation, which influenced the wild market swings of the last couple of weeks, have remained the same, this trading week global equity markets recovered strongly with the VIX volatility index, Wall Street’s benchmark for share volatility, again dropping to around 18 compared to around 30 end of last week. So it seems that investors saw last week’s ‘correction’ as a buy opportunity and are again betting on the so called ‘goldilocks’ scenario.

The goldilocks principle is derived from the 19th century children’s story “Goldilocks and the Three Bears” in which a little girl named Goldilocks enters the forest home of 3 bears and tastes three different bowls of porridge, after which she finds that she prefers porridge which is neither too hot nor too cold, but has just the right temperature. A goldilocks economy is when growth isn't too hot, causing too much inflation, nor too cold, creating a recession.

So, just like the porridge, it’s an economy that is “just right”. And although economists sometimes disagree on the features of a goldilocks economy, it is often associated with low unemployment rate, increasing asset prices (equities,…), low interest rates, low inflation & steady GDP growth. This trading week it seems that in the ‘battle’ between goldilocks bets - on the not too hot, not too cold global economy - and market bears who delivered some hefty blows & volatility in the past weeks, this week goldilocks was victorious. And although many investors are hoping this means the Goldilocks scenario has been jump started again, it is worth noting that rising interest rates (faster than market expectation) actually break one of the key pillars of the goldilocks economy and usually are a precursor to its end. So all bets are still on in the battle between goldilocks and market bears…

This trading week the Ageas share also benefited from the goldilocks jump start as the share increased by 1.3% to EUR 41.21, compared to the EuroStoxx 50 & SXIP 600 European insurance index that respectively increased by 3.0% & 2.6%.

Next week, investors will again turn their attention to Ageas as next Wednesday Ageas will publish its full year 2017 results.