Not Registered? Register Now.

1. My Profile >2. Additional Information

By submitting below you certify that you have read and agree to  our privacy policy.

Europe / Eurozone

ECB opens door for more QE

14 juin 2019
WisdomTree


On last week’s podcast we had the opportunity to catch up with Professor Jeremy Siegel on his reaction to the employment report and get a take on European economic developments and the European Central Bank (ECB) meeting with Frederik Ducrozet, an economist at the Pictet Group.

 

Ducrozet pointed out one of most interesting market dynamics to him is the ‘term premium’ in the bond market and how it reached an all-time low of negative 90 basis points. Ducrozet thinks this unprecedented low term premium is predicting something major from central banks—perhaps another bout of Quantitative Easing (QE) next year. 

 

Ducrozet also suggested it goes both ways and that the market may force central banks to do more QE. 

 

We are not at that stage yet – but if inflation expectations continue to progress downward – it could trigger the ECB to launch another round of QE.

 

We also discussed the ECB negative rate policy, which Ducrozet does not like. Ducrozet is worried about their impact on the banks but there are recent working papers the ECB released showing negative rates are helping the economy.  Yet ECB’s president Mario Draghi also hinted in his comments that if the ECB were to lower rates further into negative territory, it is possible there would be more support measures for banks like a tiering of negative rates that Switzerland applies.

 

We discussed whether this lower rate regime created opportunities in the equity world. Ducrozet does believe many big investors have capitulated. 

 

We see this in broad flows of global investors to Europe. They have been continually negative. At some point the negative sentiment might start to improve with much of the capitulation having come out—creating a good time to buy.  This is a trend I will be watching closely as some of the relative out performance of US over European assets extends into extreme territory.

 

To listen to full conversation, which includes an opening from Professor Siegel on his outlook for the markets and the Federal Reserve, please click on the link below.

 

 

Related products

Factor investing as an edge

Talking commodities with Nitesh Shah


Read More
Europe / Eurozone, US, Central Bank Policy impact


Previous Post Next Post
This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.

REGISTER TO RECEIVE BLOG ALERTS

By submitting below you certify that you have read and agree to  our privacy policy.