Major Central Banks Are Too Hawkish
Don’t be surprised if there’s a switch to a sort of global synchronized easing.
The global economic tide may be turning.
Photographer: Mario Tama/Getty Images North AmericaGlobal investors are positioned for a coordinated tightening of monetary policy by the world’s major central banks. Although the U.S. Federal Reserve is already far down that path, the others are just getting started. The European Central Bank is set to end its bond purchase program by year-end. The Bank of England is leaning toward hiking interest rates for only the third time in 10 years. Concerns were rising that the Bank of Japan could end the zero yield target for 10-year government bonds at its meeting last month.
Rather than join the herd in exiting fixed-income assets, investors should pay attention to indicators that suggest that the bond bears’ concerns about a strengthening economy are exaggerated. There are enough negative factors facing each of these central banks to make them reconsider, which would underpin not only debt securities but equities as well.