Mark Carney warns of complacency in financial markets

Thrugelmir

An indicator that interest rates aren't going to remain indefinately low perhaps.

He quoted the FSB's warning that "there are increased signs of complacency in financial markets, in part reflecting the search for yield amidst exceptionally accommodative monetary policies".

These policies include very low central bank interest rates and measures such as quantitative easing, which are designed to reduce interest rates in financial markets.

Asset prices have become "stretched across a growing number of markets, increasing the risk of a sharp reversal," he said.

http://www.bbc.co.uk/news/business-29364275

Graham_Devon

Thrugelmir wrote: »

An indicator that interest rates are going to remain indefinately perhaps.

I'd hope they remain indefinately. What would we replace them with?!

Thrugelmir

Graham_Devon wrote: »

I'd hope they remain indefinately. What would we replace them with?!

Opps............:o

Graham_Devon

Thrugelmir wrote: »

Opps............:o

Oops for my part too, didn't read it as you meant it, which seems rather obvious now!

Generali

Thrugelmir wrote: »

An indicator that interest rates aren't going to remain indefinately low perhaps.



http://www.bbc.co.uk/news/business-29364275

Stock markets look reasonable to me. Bond prices are high as a matter of Carney's policies. House prices...hmmm.

pop_gun

No way will Carney or any other BoE governor will raise interest rates and risk collapsing the UK economy which is more indebted than U.S. when that debt is measured in relation to it's GDP.

chucknorris

Generali wrote: »

Stock markets look reasonable to me. Bond prices are high as a matter of Carney's policies. House prices...hmmm.

I am about as far away from being an 'expert' as you can get on the stock market, how often do the 'experts' call it right anyway? But simply applying common sense (which of course doesn't always apply) my view is:


The stock market was just as high in the past when rates were higher, so why can't it stay at current levels with higher (but normal level) interest rates. Yes of course some will have invested in shares chasing a yield in preference to really low savings rates, but is this share of the market really that significant? I was one of these but also I had recognised that I was holding too much in cash anyway and needed to move into equities instead. Yes of course the stock market changes rapidly on sentiment and would dip when rates go up, but rates will only go up when the economic situation is improving, surely it wouldn't be long before the market recovered due to the fact that economic outlook is improving. Just my 2 cents worth.

purch

Graham_Devon wrote: »

What would we replace them with?!

Sharia Banking manages quite well.

Generali

chucknorris wrote: »

I am about as far away from being an 'expert' as you can get on the stock market, how often do the 'experts' call it right anyway? But simply applying common sense (which of course doesn't always apply) my view is:


The stock market was just as high in the past when rates were higher, so why can't it stay at current levels with higher (but normal level) interest rates. Yes of course some will have invested in shares chasing a yield in preference to really low savings rates, but is this share of the market really that significant? I was one of these but also I had recognised that I was holding too much in cash anyway and needed to move into equities instead. Yes of course the stock market changes rapidly on sentiment and would dip when rates go up, but rates will only go up when the economic situation is improving, surely it wouldn't be long before the market recovered due to the fact that economic outlook is improving. Just my 2 cents worth.

Share prices are measured as cheap or expensive using the ratio of price per share divided by earnings per share. Normal for the UK is about 20, currently the market is sitting at 18.

Add to that the fact that very low interest rates are very low and will be very low even if they rise quite substantially then shares have quite a lot of rising still to do IMHO.

I think your view is a very valid one TBH. Most companies aren't carrying much debt so rises in interest rates won't impact on earnings very much but interest rates won't rise until companies gain the ability to push up prices. That they can push up prices would mean that they can increase revenues. Rising revenues with slowly rising costs...? :beer: :money:

Jason74

He's right of course, although there is something of an irony in these warnings coming from Carney, given the fact that many of the conditions he describes are the direct result of the actions of the institution that he heads.

IronWolf

I dont think markets are complacent, they are simply responding to the low interest rate environment. Its common sense that when interest rates fall, asset prices rise, and when interest rates rise significantly, asset prices fall.

The financial industry has money it has to put to use, its not like it can keep £billions in cash and wait