Returns in perspective
04 July 2017
The month ended on a fairly dramatic note after traders interpreted European Central Bank (ECB) President Mario Draghi’s innocuous comments, on the strengthening Eurozone economy, as signalling an approaching end to monetary policy stimulus. At the same monetary policy conference, statements by his Bank of England counterpart were also interpreted as talking up prospects of rate hikes. As a result global bonds sold-off, the euro and pound gained against the dollar and stocks also hit a wobble. But this does not appear to be a repeat of 2013’s ‘taper tantrum’ when markets sold-off sharply after then US Federal Reserve Chair Ben Bernanke suggested that stimulus could be pared back. While growth in Europe is indeed looking good, inflation remains very low – and is falling – and the ECB has no need to rush towards the exit.