Australian Investment Blog

With interest rates remaining low, will people finally start spending?

The Chinese economy needs domestic consumption for the next stage of its development and growth; conversely the Western economies need it to lift them from stagnation. Stimulus is again on everybody’s lips and the yield play has run hard accordingly. Last night, equities again surged on poor economic data, led by Europe, as investors rub their hands together in glee at the thought of more “free money” for longer. For an old player like me, even after 5 years of seeing this phenomenon, watching markets rally on poor economic and macro data creates an uneasy feeling. As I have stated a few times recently, when rates turn, it is likely to significantly unnerve markets. But I feel this reversion has been pushed further into the future by the respective Central Banks. However, while the market has embraced low interest rates and hence “bought yield” it has not yet charged into the Discretionary Retail space, this is an area investors should be watching carefully as its showing a little life.