Negative interest rates are coming, and investors will now be looking to take action in order to “get ahead of the curve and build wealth”, according to a leading market commentator.
While the debate on whether negative interest rates help the ‘real economy’ or not will rumble on, there is no doubt that they help boost financial asset prices, said Nigel Green, chief executive of deVere Group.
“A new global era of negative interest rates would have been unimaginable even a few months ago. But this has now changed due to the coronavirus,” he said.
According to Green, it can be reasonably expected that more and more central banks around the world take a dramatic change of policy course and take rates to below zero, like their peers in Europe and Japan.
“There is legitimate debate about the efficacy of negative interest rates on boosting economies,” he said.
“They could turn out to be a masterclass in the law of unintended consequences as they could be viewed by consumers and investors that the underlying economies are in a perilous position and, as a result, prompt a drop in consumer and investor demand.”
Highlighting how negative rates boost asset prices, Green added that market-wise investors will be looking to boost their portfolios “before the next round of cuts and the likely subsequent price increase”.
“They are taking advantage of the lower entry points now before the next major rally In addition, those with savings in the bank are already getting no return thanks to the ultra-low interest rates. Negative rates will offer them more reason to increase their exposure to equities, for example,” he said.
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