Market Comment: Optimistic tone at Jackson Hole

News item -

This weekend, the Jackson Hole Economic Symposium has taken place. Financial markets had long been anticipating the speeches of the two key participants - Federal Reserve President Janet Yellen and ECB President Mario Draghi.

"The speeches of Yellen and Draghi were not very specific about the upcoming monetary policy actions," according to Mary Pieterse-Bloem, Head of Fixed Income Strategy, "but they emphasised broad-based optimism about the global economy, which is in line with our recommended stance in the investment portfolio." 

Central bankers see broad-based recovery

"The optimistic tone in Jackson Hole on global growth was based on multiple growth engines. The recovery is broader than anything we have seen since the global financial crisis," signals Pieterse-Bloem. "Inflation, however, remains subdued. This is surprising given the constructive economic circumstances. The Fed has indicated at Jackson Hole that it has started looking for a possible explanation into the inner works of the economy." 

Financial markets did not find clear direction of long-term monetary policy this weekend. Pieterse-Bloem: "Investors will now shift their focus to the upcoming meetings of the major central banks. We expect in these meetings more clarity about the tapering of the asset purchasing programme of the ECB (on Thursday 7 September) and about the wind-down of the loose monetary policy in the US (on 19 and 20 September)." 

Eyes on the next central bank meetings

We will look carefully for clues at the forthcoming monetary policy meetings on how central banks will balance between good growth and low inflation. We believe that they will tread carefully, and that therefore the investment climate remains constructive for taking equity risk. As such, we continue to be strongly overweight towards equity and strongly underweight towards bonds.