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Morningstar Chief Investment Officer Matt Wacher says the change in the mood on rates is a “double-edged sword” as a changed outlook for investment markets has been sparked by suggestions of falling interest rates in America.
This change in the outlook for investment markets has sparked the best month for bonds in 35 years.
However, Sky News Business Editor Ross Greenwood said Australia has no rate cuts on the horizon as “sticky inflation” will likely mean rates will remain elevated for longer than expected.
Deutsche Bank is suggesting instead of hitting households with repeated rate rises, it could sell $100 billion of bonds on its balance sheet between five and eight years to maturity, which would tighten monetary policy, without cutting rates.
“It’s a bit of a double-edged sword because the markets really want those interest rate cuts, bond yields to fall, and we’ve seen that through November,” Mr Wacher told Sky News Australia.
“But at the same time, they’re really pricing in slower growth and that could start to affect the consumer a little bit more and maybe start to impact more of those cyclical stocks that have also done well.”
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