Our compact monthly update on developments in the real economy and on financial markets.

Central bankers under pressure (2019/9/19)

Where the Fed is being urged to ease by President Trump, the ECB is voluntarily committing to expand its ultra-accommodative monetary policy further, thereby forcing investors to take higher risks.

Clear & concise

  • Prolonged economic weakness, with risks tilted to the downside;
  • The Fed has so far withstood Trump’s pressure, only lowering its key rates modestly;
  • The QE2 restart means that the ECB is at risk of overstepping the next red lines;
  • Government-bond yields are set to remain at historically low (negative) levels;
  • On the asset-allocation side, we are downgrading cash in favour e.g. of euro equities.

Read more Perspectives October 2019

5-Year Projection: Negative Auspices (2019/7/31)

Ongoing economic weakness makes it difficult for central banks to reverse the interest rate cuts which are under way. Hence, returns on safe assets will remain negative for a long time in Europe.

© Quelle: Refinitiv, BayernLB Research

  • Synchronous global slowdown will only end in 2020, followed by a moderate recovery.
  • Rate cuts should stave off a recession but are unlikely to initiate a boom.
  • Low inflation will make it harder for central banks to resume the path to normalisation.
  • In Europe, returns on safe assets will remain negative for a long time.
  • Higher-risk assets will benefit but be susceptible to the downside risks predominating.

More: 5-Year Projection: Negative Auspices