Regime change
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Investment Outlook for 2019
A regime change is underway in financial markets. Non-conventional central bank policy in the wake of the Great Financial Crisis of 2007-2008 sent waves of liquidity flooding through global asset markets. In December 2015, the US Federal Reserve launched the first phase of its policy normalisation by raising the federal funds rate by 25bp at a time when other central banks were still cutting rates or expanding their balance sheets. We are now entering the second phase of the unwinding of unconventional policy as the US policy rate increases are accompanied by rising rates elsewhere and shrinking aggregate central bank balance sheets (See Exhibit 1 below)