The world is about to experience the synchronous effect of monetary easing at a global scale. If you look at the chart below, the majority of Central Banks have just started the interest rates easing cycle. With the notable exceptions of Brazil and Japan, among the big ones, which are tightening, the rest are basically in the same part of the economic cycle, have managed to bring down inflation, and want to change gears to a more pro growth environment, and for that, their respective economies need lower rates. Are we going to see a pick up in inflation? It’s likely, particularly if trade wars and tariffs really come back. But it would appear as if the Trump administration is using tariffs more as a negotiation tactic than as an economic tool, although at some point, they will need to enact them in order to not lose credibility. Perhaps the big question is wether equity markets will react to lower rates with additional gains, or if central banks will react to equity markets potential correction to lower valuations, that are quite stretched.
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