.....yes ECB, rates are the future stake in the heart of equities.

rates-shares-ECB-mia-culpa.JPG

Sure, savers have invested and at the same time have propelled equities and alternative investment markets into the stratosphere.

This week Mario Draghi announced that Eurozone quantitative easing (QE) will end in December.

However, he also announced no change to interest rates until roughly, June 2019.

The comment above that "savers can invest in other assets and they have done so" in response to whether or not savers are being hit too hard, is the precise reason why equities and alternative asset markets have been floating close to the sun.

In the US, Jerome Powell's Fed has started to do something about this by recalibrating the volume or liquidity of money (through the Fed's balance sheet run-off) and regulating the cost of money through interest rate movements.

However, Draghi has signaled a reluctance to hike interest rates in the Eurozone, choosing instead to announce an end to bond buying (assuming there is no about face on this).

In light of declining real growth in the Eurozone, there is a growing possibility of a significant downside slingshot to Eurozone equities, if and when rates recalibrate in the future.

Mike


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