I was not aware of this until I was affected

  • Equities: If a company’s cost of borrowing is lower than the dividend yield, it could re-gear its balance sheet by issuing debt and buying back shares
  • Bonds: Investors can boost return potential by diversifying a fixed income portfolio across segments of the bond market that offer higher yields than government bonds, including corporate bonds, mortgage-backed securities and emerging markets
  • Gold: Gold is negatively correlated with interest rates; negative rates would be bullish for the price of gold. However, current levels of negative interest rates are too small to make a difference
  • Bitcoins: More negative rates, if passed on to consumers, could increase the popularity of cryptocurrencies. Bitcoin supply cannot be manipulated with a strictly limited hard cap and predictable daily output. It cannot be devalued by central banks and more of it cannot be printed
  • Other commodities: Commodity prices have been range-bound for over a decade, i.e., since the global financial crisis depressed demand, suppressed inflation and strengthened the USD. A negative interest rate could influence the exchange rate negatively, bumping up commodity prices

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Acuity Knowledge Partners

Acuity Knowledge Partners

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/