“Central banks are unleashing easy money to fight an imaginary villain, consumer price deflation, at the risk of feeding a real monster, asset price inflation,” Head of emerging markets and global macro at Morgan Stanley Ruchir Sharma said.
Mr Sharma believes that asset price inflation is as dangerous as consumer price inflation, and the Fed should take responsibility for both. In an op-ed published by the Wall Street Journal, Mr Sharma commented that we are living one of the longest US rallies in history and investment decisions seem guided by the availability of liquidity, not opportunity.
Mint partners’ Bill Blain argues that we are not going to see a massive increase in rates, at least in the short term.
“Even if we see global central banks starting to hike, it’s been pushed much further down the road than we originally expected. What we are going to see is global growth re-established, inflation coming back in and that means that rates in the bonds market will rise,” he commented for Bloomberg.
JP Morgan strategists recommend to reduce risk to some extent.
“We feel OK with our long-standing strategy to overweight riskier assets, but have become increasingly worried about the more medium-term prospects, forcing to take some risk off the table. In our monthly GMOS from two days ago, we brought Cash to Neutral, having been Underweight for most of the past six years,” said the investment bank’s Global Asset Allocation Report on May 8th.