http://www.valuewalk.com/2016/02/negative-interest-rates-wont-you-take-me-to-funkytown/?all=1
On Friday the Bank of Japan (aka, the Japanese Fed) cut the rate on
current accounts that commercial banks hold with it to minus 0.1%,
adding that it will push the rate even lower if needed. Effectively,
this means that banks will be charged to keep excess assets with the
central bank. This move sparked a big jump in stock markets around the
world. Some mistook the rise as being predicated on the assumption that
negative interest rates would work to spur growth and therefore earnings
and therefore stocks. This is wrong. Stocks moved because as a
financial asset they became slightly more attractive than they were the
day before, especially when having cash has a tangible cost, and when
the same people that just took rates negative said they will take them
more negative if they have to. So asset allocators did the logical thing
and decided that the prospect of losing money in stocks was more
attractive than the guaranty of losing it in bonds. So stocks went up.
No comments:
Post a Comment