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1 minute with the CIO

A slowing world
With many regions suffering a socalled "inflation disease", Central Banks are trying to generate inflation. Whether they succeed remains to be seen. Nonetheless, financial repression is shifting the burden of debt from debtors (especially public sector) to savers (households).

Possible consequences?
With interest rates close to zero, Central Bank action could affect relative currency rates. Therefore, we believe the risk of a currency war is rising. This may have unintended consequences on wider markets, and could spur a new wave of turbulence.

Not by rates alone
Monetary policy may fail to restart growth if the transmission mechanism between liquidity and the real economy is not working. Thus, the quality of political leadership in balancing between pro-growth policies and structural reform is a key investment concern.

The income premium
With few options investors are left to scale up risk in an opportunity set where valuations have been stretched by five years of bull markets. Asset classes that may offer an "income premium", in terms of addition yield compared to core government bonds, should be considered in a solid risk management framework.