AllianceBernstein’s Peebles Says We’re in Bubble After Stimulusby
Negative rates amount to ‘confiscation of money,’ Peebles says
Argentina, Zimbabwe show futility of central banks, he says
Douglas Peebles, who oversees more than $200 billion at AllianceBernstein Holding LP as chief investment officer of fixed income, said that years of central banking stimulus have propelled asset prices to levels that may be unsustainable.
“I’m not very bullish on financial asset prices at the moment,” Peebles said Tuesday during an insurance conference in New York hosted by S&P Global Ratings. “I’m not allowed to call this one a bubble yet, but I actually think we’re in a bubble, sorry.”
Investors are paying more for bonds as central banks work to stimulate economic growth. The yield on Germany’s 10-year bund dropped below zero for the first time on record on Tuesday, as the nation joined Japan and Switzerland as major economies with negative figures for that duration.
“I call that confiscation of money,” Peebles said. “If central banks could just create wealth and create growth then Zimbabwe and Argentina would be the richest countries in the world.”
In the U.S., fewer Federal Reserve officials expect the central bank to raise interest rates more than once this year, according to projections released by the Federal Open Market Committee Wednesday following a two-day meeting in Washington. The FOMC left the target range for the benchmark federal funds rate unchanged at 0.25 percent to 0.5 percent, the first unanimous decision since January.
Peebles said insurers can counter low rates by boosting direct lending as banks scale back. This could also be a time to add emerging markets debt, he said.