OUR MACROECONOMIC BACKGROUND ASSESSMENT
During the second quarter of 2014, all four largest central banks in developed countries (US, Eurozone, Japan and UK) continued to stimulate growth in their economies via a combination of low interest rates and quantitative easing. However, due to the fact that the economic growth has been weak and risk prone, many risk-averse investors continued to buy bonds, driving their prices higher and yields lower. These yields were not attractive to other investors, who would have invested in bonds had the yields been higher. As a result, these other investors continued to invest in equities, especially in the largest equity markets, in search of higher yields despite equity valuations being above their historical averages.
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During the second quarter of 2014, all four largest central banks in developed countries (US, Eurozone, Japan and UK) continued to stimulate growth in their economies via a combination of low interest rates and quantitative easing. However, due to the fact that the economic growth has been weak and risk prone, many risk-averse investors continued to buy bonds, driving their prices higher and yields lower. These yields were not attractive to other investors, who would have invested in bonds had the yields been higher. As a result, these other investors continued to invest in equities, especially in the largest equity markets, in search of higher yields despite equity valuations being above their historical averages.
To read the full letter, please Click Here.
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