Zurich CIO predicts further QE to ward off recession
The economic cycle is going to be artificially prolonged thanks to a global trend toward quantitative easing, Blackfort CIO Andreas Bickel (pictured) has
told Citywire Switzerland. According to Bickel, stimulation from China and the ECB, along with a U-turn from the Fed, makes the end of the cycle an unlikely scenario.
‘China has started to stimulate the economy further with fiscal and monetary stimulus. The ECB imposed TLTRO III, which can be considered a QE
measure. They keep reinvesting maturing bonds, and [Mario] Draghi said they have more tools to stimulate if needed.
‘The US is on hold for rate hikes and will stop shrinking the balance sheet. The BOE is on hold, although fiscal stimulus is discussed and [Mark] Carney
might be forced to react if Brexit escalates.’ This may be the right way to go, Bickel explained, as pulling back may rock markets that are yet to recover fully from the most recent crisis.
‘The recovery after the financial crisis was very modest. There are still countries which are not back to pre-2008 levels. Debt burdens – public and
private – are too high for higher rates. How to solve that? Definitely not by tightening at the moment,’ he said. He also noted that keeping markets steady in the short term would require a
consolidation. However, in the medium term, he believes that banks will stay the course. He said: ‘Rates will stay low for longer, disinflation will continue and stimulus will continue.
‘Equities are in a secular bull market. We have now seen a correction, and we are waiting to see if we can regain the all-time highs of last year. If PMIs are
any guide, there is hope that we can reaccelerate in industrial production, but the IFO is contradicting this opinion. There is no clear call.’
Published by Ashley Lowe 15 Mar, 2019, Journalist, Citywire Switzerland