President calls for zero or lower interest rates
As western economies (ie Japan, Europe, Switzerland) and now the US sink into sustained negative interest rates policy, shall we reevaluate the way we think investing?
What I can quickly think of:
1) Will bond issuers (ie corporates) find willing lenders, and if so at what spread to sovereign bonds? Will insurance policies and retirement fund find bond substitutes, driving up corporate spreads? I know infrastructure funds are hot these days for that very reason (chasing yield).
2) Higher multiples for risky assets to reflect lower LT expected returns, cheap leveraged money to bid up these to capture the “risky to rf” spread.
3) What would happen to “store of value” assets, such as gold (and even BTC?)
4) Should we expect a greater rich-poor divide, leading to unrest and finally the redefinition of the social contract in western economies?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.