Draghi’s dominoes

An old joke goes that economists are too smart for their own good and not smart enough for anyone else’s. New European Central Bank (ECB) programs such as the ABSPP and CBPP3 certainly sound smart, but will they do any good?

At a glance

  • „„„„The ECB has announced new policies to expand its balance sheet, in an attempt to set off a domino effect eventually leading to higher growth and inflation.
  • „„„„If Draghi and the ECB are successful in their efforts, they could help turn the Eurozone into a potential leader for global equity markets.
  • „„„„For now, however, we remain cautious about the effectiveness of the policies themselves, which may prove more difficult to implement than some anticipate.
  • „„We prefer to use our risk budget to overweight equities and high yield credit in the US, where economic and profit growth is strong.

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