ECB, Markets & A “Confirmed” Buy Signal
This week’s newsletter is a heterogeneous amalgamation of reflections on recent events, the most important of which was the European Central Bank’s (ECB) push into a negative interest rate policy.
The European Central Bank took extraordinary steps this past week to stave off the threat of deflationary pressures in Europe. This included cutting key interest rates below zero for the first time in a bid to get banks to lend more to credit-starved customers and would make, for a start, up to €400 billion ($545 billion) in cheap loans available to banks later this year. The ECB hopes that the banks will lend more to the private sector in the future.
The Buy Signal Is In
In January of this year, the markets gave both a “warning” and then a “sell” signal in our portfolio allocation model. This would have normally been a signal to reduce equity exposure to portfolio allocation models. However, we opted not to do so as the markets had “technically” not done anything wrong.
The only reason that we went against our portfolio model signals was due to the Federal Reserve’s ongoing monetary intervention programs. The excess liquidity has continued to act as a support for asset prices in recent months so we opted to remain allocated with a cautious eye towards to financial markets. This has worked out to our advantage so far.
ALSO INSIDE THIS ISSUE
- Caught In A Liquidity Trap
- Pictures Of An Exuberant Market
- The Buy Signal Is In
- Portfolio Action Recommendations:
- The Cost Of Doing Business In Your 401k Plan
…..read more & view some great charts HERE