Strategy

Strategy: Comments from DBS CIO

Summary:
· Recent moves by the ECB, BOJ and the Fed will support the risk-asset market rally a bit longer
· The rallies may even break out of the downtrend channels they have been trading within over recent months, but no new bull market.
· The drivers of big swings in the markets are the conflicting forces of the cycle and government/central bank interventions. Currently, as market cycles mature, economies remain anaemic, and central banks’ policy cupboards are bare.
· But by the year’s end, the trend will likely be bearish

Other comments:
- “Today’s negative interest rates complicate not only the industry’s asset management strategies, but also the pricing, loss reserving, and capital management strategies for property/casualty and life/health insurers around the world,” … there are temptations to reach for yield by reducing credit quality and/or increasing duration. Both strategies increase risk.

- Fed is keeping an eye on global situation, because it does not want to push up the dollar.

- On the yen, Mr Sakakibara’s comments earlier this week was cited. “The yen’s appreciation isn’t the result of monetary policy or because Japan’s recovery is strong. It’s that the world economy has become very disorderly. The problems in the Chinese economy won’t be easy to sort out, and global growth is stagnating. In that environment, the yen will necessarily strengthen. We’re in the first phase of that now.”