Global central banks are increasingly adopting negative rates to support growth and hold off deflation. However, as much as central banks are trying to support the global monetary system we think they could be undermining it. Negative rates have become a problem and are not the solution, in our view.Sub-zero policy lowers net interest margins for banks (and) are also likely to weigh on loan volumes. While one country or region can benefit from a weaker currency, if negative rates are adopted, this gain may be negated if more central banks adopt the extraordinary policy. In an interconnected financial system we need interconnected policy makers. It doesn’t look like we have that right now.
While we continue to expect higher stock indices in 12 months, we concede it will be difficult for our index to make gains in the near-term while investors question the effectiveness of global central bank policy.
So, stocks are going higher other than the fact that they’re going lower. Ah, sellsideland!
