Analysts call for central banks to cut rates and offer to buy risky assets
While governments, especially in Europe, have been reluctant to turn on the fiscal taps, some market players are now expecting more drastic action to arrest declines. At Mediolanum Asset Management in Dublin, head of equity strategy David Holohan says “a significant step-up in fiscal stimulus” in the US could come in days. There could be similar measures in Europe, though these may come later.
The firm hasn’t bought the dip yet, having turned underweight on stocks and added hedges earlier, head of investment strategy Brian O’Reilly said. US shares are still valued at about 17 times 2021’s earnings, compared with the sub-15 multiple seen during the sell-off in late 2018, he pointed out. Ian Shepherdson, founder of Pantheon Macroeconomics, said on Twitter rising coronavirus cases in the US could see the Fed cut rates to zero and introduce a $1-trillion stimulus package. In the meantime, potentially brace for the treasury curve to fall near zero, with the S&P 500 tumbling further, he wrote.
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