The tortoise and the ECB
Investors may wonder how long the European Central Bank (ECB) will slumber after taking an early lead in the race to expand its balance sheet to facilitate growth across the eurozone - the world's second-largest economy.
“While the philosophical merits of QE are questioned and debated, no one can doubt the results.” - By Harley Bassman, executive vice president and portfolio manager, PIMCO
Summary below by Anthony O'Brien
Investors may wonder how long the European Central Bank (ECB) will slumber after taking an early lead in the race to expand its balance sheet to facilitate growth across the eurozone – the world’s second-largest economy.
Bassman argues that it is curious that the ECB continues to sit on its hands while the US and Japanese economies move steadily ahead.
While not a certainty, it seems highly unlikely that the ECB will indefinitely allow its main trading partners to competitively devalue versus the euro. And since there is no reason to reinvent the wheel, Europe’s policymakers will likely unveil a familiar-looking and expansive QE policy designed to accelerate asset velocity and, in turn, reflate their equity market.
A sharp poke of QE “infinity” was enough to send the S&P up 45% through November 17. Similarly in Japan, the Abenomics version of QE “infinity” has sent the NKY up 70%.
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