Rathbones’ Smith: “ECB bazooka futile in the long run”

“The ECB has announced its open-ended QE bazooka, as well as more generous long-term refi operations (LTROs). While monetary stimulus is likely to stave off recession, Europe will remain weak and vulnerable, and recession is still a distinct possibility. However, there’s little evidence yet to suggest “Japanification”. Throwing money at the problem is just that; it doesn’t address the underlying structural and cyclical issues. Arguably, years have been wasted where the focus should have been on fiscal, not on monetary stimulus. So while there is some short-term reprieve for Eurozone equities, our research shows that they remain more sensitive to changes in Chinese or global business cycles than to changes in the Eurozone cycle, meaning any uplift is unlikely to be sustained.”

Ed Smith
Head of Asset Allocation Research

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