25 Jul 2013
Flash: Market overreacting to QE tapering? – Goldman Sachs
FXstreet.com (New York) - According to the Economics Research Team at Goldman Sachs, “We think the market has overreacted to the tapering discussion in two dimensions.”
Key quotes
“We do not think it has distinguished sufficiently between tapering, which we now except to commence in September rather than January, and the broader monetary policy stance, which we expect to remain very accommodative with the first US rate hike in early 2016.”
“We do not think the market has given sufficient credit for the notion that the tapering decision is a consequence of a better growth environment. In terms of assets, we think DM equities and corporate credit spreads have overreacted.”
“Even though these assets have already rebounded, we think there is still a bit more to go. The reaction in EM FX and rates may also have moderately overshot in the near term. Longer term we could see more FX weakness and we have therefore shifted a number of our EM FX forecasts to weaker levels.”
Key quotes
“We do not think it has distinguished sufficiently between tapering, which we now except to commence in September rather than January, and the broader monetary policy stance, which we expect to remain very accommodative with the first US rate hike in early 2016.”
“We do not think the market has given sufficient credit for the notion that the tapering decision is a consequence of a better growth environment. In terms of assets, we think DM equities and corporate credit spreads have overreacted.”
“Even though these assets have already rebounded, we think there is still a bit more to go. The reaction in EM FX and rates may also have moderately overshot in the near term. Longer term we could see more FX weakness and we have therefore shifted a number of our EM FX forecasts to weaker levels.”