Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed income in the Global Investment Center of the Private Bank of ABN AMRO, participates in the investment panel discussion on BNR Nieuwsradio, 2 April 2019. During this panel discussion, Mary Pieterse-Bloem discusses with the other panel members, Jan Braaksma (journalist Het Financieele Dagblad) and Koen Bender (Director Mercurius Vermogensbeheer), what investment decisions they have made recently and discusses what investors can expect from the coming months.
Global bond yields are lockstep in a spiral lower, as markets adjust to a world of lower interest rate expectations and worries about a weaker global economy. Catalysts that could stop the massive move would be improved economic data or optimism around a trade deal between the U.S. and China. Some strategists say the moves were sparked by a more dovish-than-expected Federal Reserve and have been exaggerated by end of quarter and technical trades.
Because of this unfavorable economic outlook, Mary Pieterse-Boem's most recent transaction was to take a position in gold. Because gold prices tend to increase in a period of low economic growth, without increases in the interest rates, the unfavourable economic outlook leads to positive expectations about the price of gold. Furthermore, we expect the American dollar to weaken and the Chinese Yuan to become stronger, which also has a positive effect on gold prices. As such, buying gold was quite an obvious decision.
When it comes to shares, however, decisions become more complex. The interest rates are really at a poor level right now and that is where the market looks at. On the one hand, low interest rates can be supportive. However, on the other hand, it is unclear how economic circumstances are going to develop in the coming quarters and whether central banks have enough means left to give the economy a boost when this is needed. As such, we are in tense terms with regards to stock market prices. Nevertheless, a nuance must be made because we can clearly distinguish between sectors which are very dependent on interest rates, both in a positive and negative fashion. This became clear yesterday in the US: long term interest rates increased and financials immediately experienced a revival. However, companies with positive cash positions barely respond to such fluctuations.
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Click here to listen to the entire panel discussion on BNR Nieuwsradio, Tuesday 2 April 2019.
