For those who believe a mere 25-basis-point increase in short-term interest rates is of no investment concern, consider the reaction we saw yesterday in US financial markets when Eurozone central-bank officials intimated that bond purchases by the European Central Bank will gradually wind down in advance of the scheduled end-date of March 2017. In what I have referred to as a global game of musical chairs with respect to investing in risk assets, the simple suggestion by unnamed officials that the music might slow down had investors scurrying for a seat. I suspect that the reaction to a rate increase in the US would be far more dramatic, which is one reason I don't see it happening in December.
In a program that is nearly identical to the one that the Federal Reserve operated, the ECB is currently buying approximately $90 billion of sovereign and corporate debt each month. The… Read More …