In financial markets’ history, 2019 ended as one of the most active years as it saw stock around the globe rank up after every account.
The value of Nasdaq, one of the biggest tech firms, encountered a 40% increase in 2019. Dow Jones industrial has grown with an increase of 255, and S&P500 has increased with a percentage of 30%. However, all these countries, despite their increase in stock they are all in poor shape except the US. The US Federal Reserve leads to the prolonging of the stock market by ultra-low borrowing costs. Compared to the past, where share prices fell upon release of wrong economic information, nowadays release of the same information pulls the shares upwards since investors depend on the intervention of the Central Bank.
For the past decade, central banks took actions upon any economic distress training entrepreneurs to depend on them. In 2018, the federal reserve hiked rates leading to a severe sway in the market. However, the president of the United States, Donald Trump, brought back the market to its good ways after pressuring Jerome Powell, the Fed chief, for holding back the growth of the market. Investing in economic management is now the duty of central banks after the government abnegated its obligations. More so, the Central Bank is tasked with other functions such as introducing money creation schemes and cutting of rates. Improving shares, property, and bond prices and ensuring that there is a steady flow of cash in western countries.
In the hope of regenerating the static growth in Australia, the Reserve Bank of Australia reduced interest rates. The same case happened in Thailand and South Korea. Elanor Creagh claimed that improving the repo liquidity would have happened at the ending of the previous year. 2020, the central bank policy is set to be inefficacious and running out of time. Stock markets of QE were slugging to feel the positive effects after establishing QE.
Klassen argues that most governments should overshadow the duties of the Central Bank and invest. However, in some countries such as Australia, governments can’t take over responsibilities, and this has posed a lot of challenges. He added, saying that Donald Trump was doing his part as he was able to spend other people’s money and that the UK election was about who invested more. Klassen claims that if the government wants ready to spend, investment money will come from Corporate debt. Hence the coming year, there won’t be a source of growth income diminishing the markets.
Dil Bole Oberoi
