While markets continue to expect more stimulus, there is now thinking that major central banks have little ammunition left to pump prime the world economy. The governments in developed countries need to step in. Speaking to Bloomberg TV India, Bank Julius Baer Head of Asia Research Mark Matthews said one person who can embark on a stimulus programme is Donald Trump, if he wins the presidential election in the US, as he has vowed to scale up infrastructure spending.

However, it will also mean the US government will have to borrow a lot, he warned.

How are the markets looking to you right now?

I think the markets are at a summer low, which they are usually at this time of the year. It’s a typical summer when people are getting ready for holidays and trading volumes are thin.

Where do you see high networth money moving? Is it moving towards precious metals or are equities still the favoured asset class?

It’s not just high networth individuals, there has been a renewed interest in precious metals from many different people. You can see that from the speculative positions. A lot of people do own gold and silver. But I think the prices of those should slowly grind up if the commodities have been put in the bottom, if interest rates remain low.

A lot of focus right now is where will be the next action come from — whether it is governments’ fiscal steps or the central banks’ monetary measures…

I think you have answered your question. There is very little ammunition that is left with central banks. The cat was let out of the bag back in February when the European Central Bank and Bank of Japan both took interest rates into even more negative territories than they were before. That had a nasty consequence. We started to see serious questioning of the banks’ ability to be profitable and there was a big collapse in banks’ share prices. I don’t think either of those banks (ECB and BoJ) will take interest rates any lower.

And the incremental value of quantitative easing (QE) is also questionable. So then it is up to governments. I think the major person who can embark on a stimulus programme will be Donald Trump, if he wins the election in the US because he has said that he would do a lot of infrastructure spending. In the US, it is needed. But it also means the US government has to borrow a lot. Otherwise, I don’t think the economies of that part of the world are in terrible shape that we will need a new deal type thing. But central banks can’t do much more.

Do you believe that we have moved into a market where principle preservation has become more important and that’s why the shift towards silver and gold, and that returns have probably taken a backseat?

I think there was a lot of volatility in the commodities market and their prices were falling. I think that ended around February. And all of these things were interlinked. February will be looked back by the market as an inflection point. As far as commodities are concerned, I think they have bottomed out.

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