Strategy Video: Risk Appetite and Global Stimulus
• The Fed has already capped its QE program and is closing in on a rate hike
• While the FOMC stimulus programs have led the global swell in support; there is ECB, BoJ and PBoC backup
• Will the transition from a Fed led stability to an aggregate be steady? Is it a viable substitute
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The S&P 500 is a good measure of investor sentiment - though it is heavily skewed. The equity index is buoyed by complacency and a 'reach for yield' that has evolved in large part from the extremely loose policy amongst monetary policy groups. In the transition from the Great Financial Crisis to the now, six-year recovery; the Fed's support was critical to the global steadying of sentiment. But how important is this contribution to the the market's subsistence considering the taps have been turned off? Can the US central bank's largest peers - the European Central Bank, Bank of Japan and People's Bank of China - fully counterbalance the Fed's absence? Is sentiment so robust that it will easily trade one QE program for another? The risk should stimulus not hold the dam for speculative appetite is tremendous. We update this big picture quandary in today's Strategy Video.
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