Low interest rates have been a mixed blessing for equities
From The Economist
Published: September 30, 2010
IF YOU are the sort of person who does not pay much attention to the daily gyrations of the stockmarket, congratulations. After nearly nine months of volatility, and a deciduous forest's worth of reports by stockbrokers on the outlook for markets, global share prices are back where they were at the start of the year.
All this frenetic activity has doubtless generated lots of income for middlemen in the financial sector. But the clients of stockbrokers have, in aggregate, merely taken home their dividends. And given that the American market is yielding just 2.5%, a lot of that will have been absorbed by fees and commissions.
The lacklustre performance of equity markets in 2010 is symptomatic of the previous decade. A long-term asset-return study by Deutsche Bank found that American equities had delivered slightly negative returns over the ten years up to the end of July.
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The factor pulling stockmarkets in different directions this year has been low interest rates. On the one hand, low rates entice investors out of cash and into riskier assets. For example, issuance of American high-yield (or junk) bonds has already reached $168 billion this year, more than was raised in the whole of 2009. Jim Sullivan of Prudential, an American insurance group, says that many institutional investors are drifting up the yield curve, buying investment-grade bonds as an alternative to low-yielding Treasury bonds. Equities have benefited from the same process.
On the other hand, the implication of low interest rates is that the outlook for economic growth, and thus corporate profits, is extremely subdued. The market has suffered a couple of "growth scares” this year, first when the European sovereign-debt crisis was raging in the spring and second, in August, when there was talk of a double-dip recession.
The markets have snapped out of their funk this month. There have been some moderately better data from America on non-farm payrolls and manufacturing activity. The National Bureau of Economic Research said this week that the American recession ended in the summer of 2009.
But the data have been far from universally upbeat. The real boost to confidence may have come from the conviction that the central banks will act again to revive activity. These hopes will have been encouraged by the Federal Reserve's latest statement on September 21st which talked, unusually for a central bank, of inflation levels "below those the committee judges most consistent over the longer run with its mandate to promote maximum employment and price stability.” In short, inflation is too low.
With rates already near zero the Fed's remaining policy option is to pursue quantitative easing (QE) in the form of money creation to buy government and corporate bonds. But will that do much to help the American economy? Paul Ashworth of Capital Economics points out that when the Fed stopped its first round of QE Treasury-bond yields were around the same as when it started. Indeed, yields have fallen since the Fed stopped the programme. And Capital Economics' measure of broad-money supply (M3) fell while QE was in operation.
David Bowers of Absolute Strategy Research nonetheless argues that low rates in the developed world will eventually boost global growth as they are imported by the developing world via managed exchange rates. Asia will come to the rescue of America and Europe. Perhaps. But there are complicating factors, including the potential for international disputes as Asian countries try to manage their exchange rates (see article).
There is also the danger of complacency. Japanese stagnation couldn't happen here, Western commentators used to argue, because the Japanese were too slow to act, propped up their problem banks, tightened fiscal policy too early and all the rest. Yet history is repeating itself.
Core inflation in America is less than 1%. Two years after the Fed slashed rates almost to zero, ten-year Treasury-bond yields are 2-3%, around the same level as Japanese bonds reached two years after Japan's short-term rates fell to 0.5%. European governments are tightening fiscal policy well before their economies have recovered output lost in the recession.
The more the economic outlook turns Japanese, the harder it will be for equity markets. American equities may have had a decade of poor returns since the dotcom crash in 2000. Yet Japanese investors have had to endure two decades of frustration (and counting) since the end of Tokyo's bull market.
前車之鑑！日經濟蕭條全球上演？
作者：經濟學人 出處：Web Only 2010/09
相關關鍵字：經濟學人
全球股價歷經數月起伏，又回到今年初的水準，這為金融中介商帶來了許多收入，但一般客戶卻沒有拿到多少錢。今年股市表現平淡是過去十年的症候，銀行發現，從7月底往回推十年，美國股市呈現些微的負報酬。
今年將市場拉上拉下的因素是利率。低利率促使投資人將資金放入風險較高的資產；也代表經濟前景不佳。市場經歷了幾次衝擊，先是歐債危機，接著是再次陷入衰退的恐懼；這個月市場重新振作，美國部分經濟數據有所改善，美國國家經濟研究所也表示，美國衰退已於去年夏天結束。
但數據並非全都有所改善，真正拉抬信心的，可能是各界相信各國央行會再次行動。聯準會於9月21日的聲明，簡單來說就是認為通膨太低。利率接近零，聯準會只剩量化寬鬆可用，但量化寬鬆卻不一定真的有用。
西方論者原本認為，日本式的不景氣不可能發生在西方，因為日本反應太慢、支持自己的銀行，又太早緊縮財政政策。但歷史正在重演。美國核心通膨不到 1%；聯準會將利率砍至接近0，過了二年，十年美國公債的殖利率為2-3%，日本短期利率掉至0.5%過後兩年，公債的水準也差不多如此。歐洲政府也在經 濟尚未自衰退完全復元之前，就開始緊縮財政政策。
經濟前景變得越像日本，股市就越難熬。美國股市自2000年網路泡沫後，這十年報酬都不佳；但日本自從牛市結束之後，投資人已經忍耐了二十年的挫折，而且時間還在繼續拉長。
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