Multi-Asset Solutions Weekly Strategy Report
- The ECB’s forceful stimulus package surprised investors with an open-ended approach to a relaunched QE—asset purchases of €20 billion per month will continue until inflation starts to rise. Policy rates were cut and forward guidance more tightly linked to inflation.
- The ECB acted in response to a protracted slowdown in the eurozone economy; downside risks from both sluggish growth in global trade and uncertainty surrounding Brexit; and persistent declines in inflation and inflation expectations.
- ECB stimulus, in isolation, will likely not be enough to change our structural outlook for low earnings growth for European equities. Open-ended QE is likely to support European peripheral sovereigns and credit markets. In general, we remain cautious on risk with a modest underweight to stocks relative to bonds.
EXHIBIT 1: EURO AREA INFLATION, MONETARY UNION INDEX OF CONSUMER PRICES (MUICP), 2014-2019
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