Rapid equity market recovery unlikely with central banks’ new strategy – Natixis

Central banks’ strategy now seems to be to keep interest rates moderately high for a long time. How will equitty markets react to this interest rate scenario? In the view of analyst at Natixis, it is difficult to imagine a solid equity market recovery.

Central banks’ strategy is to keep interest rates moderately high  

“Central banks’ new strategy is to raise interest rates moderately and keep them moderately high for a long time, as long as inflation does not return to the vicinity of the inflation target. Given the inertia of core inflation, we should actually expect a long period of moderately high interest rates.”

“During this period, the unemployment rate will rise until it exceeds the level of the structural unemployment rate. In this situation of rising unemployment and therefore persistently weak growth, it is difficult to imagine a marked recovery in share prices. The situation was different in the past as interest rates rose sharply (above the level of core inflation) and could therefore fall rapidly.”