Source: Bloomberg, Unigestion
Central bank execution of the withdrawal of monetary support will be of paramount importance to manage the negative effects on financial stability. Tapering, in our opinion, will lower future rates of return, mean-reverting to more ‘normal’ or average performance levels, which is acceptable. However, tightening poses a much bigger issue. Historically, the net reduction of central bank balance sheets and/or rate hikes have had a direct impact on demand, on both Wall Street and Main Street.
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