CLOSE

We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website https://www.hermes-investment.com, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2016, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept
CLOSE

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

Proceed

The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

When the solution becomes a problem...

Economic outlook

September 2016

Home / Perspectives / Economic outlook When the solution becomes a problem…

Neil Williams, Group Chief Economist
05 September 2016
Economic OutlookEconomics

EO-0916-thumbnail

  • The global ‘splint’ of QE will continue to be used to hold up asset prices, as central banks dare not lift the tide of liquidity hiding the sharp rocks beneath. The risk for pension funds, though, is that ‘looser for longer’ may have many years left to run.
  • As a result of their asset purchases, the world’s big four central banks‘ balance sheets have in total ballooned to over $13trn. This liquidity injection to the private sector is equivalent to about three quarters of US GDP, or 1¼ times China’s.
  • This means one half of the world’s total central bank assets has been amassed in just seven years - that is, after the last US recession ended in mid 2009. QE has since been a less than perfect remedy, & in the faster-growing US & UK has probably had its day.
  • Early QE can be credited with unclogging the financial system in 2009, providing liquidity, keeping bond yields down, & yield curves steep. It also loosened the reins further when rates were on the floor. When we factor it in, the US & UK are running negative rates.
  • As we know from Japan, the main benefit is to keep yields down for even longer. Yet, by distorting financial markets, suppressing saving, & increasing the funding strains on many pension schemes, QE may be fast becoming a problem not the solution.
  • With central banks the biggest sponsor of bonds, private institutions may increasingly struggle to find the bonds they need. It’s doubtful they can step away without unintended consequences. Their own ‘skin in the game’ also makes this unlikely.
  • So, central banks seem hell-bent on QE. With Japan still accelerating it after 17 years, most investors have never experienced a central bank turn it off. The last time the US Fed did QE proper was to pull its economy out of the 1930s depression.
  • Then, it ran QE unbroken for 14 years up to 1951 - despite double-digit inflation touching 20% in 1947. Clearly this was a different time. But, if it’s in any way a guide, we could say we are today only about half way through our QE!...

readmore

Share this post:
Neil Williams Group Chief Economist Neil joined Hermes in August 2009 and is responsible for Hermes’ economic research. He has a forward-looking approach to generate investment strategy ideas. Neil adopts top-down methods – macro and market analysis to identify interest rate and credit value, and sovereign default risk. Neil began his career in 1987 at the Confederation of British Industry (CBI), becoming its youngest ever Head of Economic Policy. He went on to hold a number of senior positions in investment banks - including Director of Bond Research at UBS, Head of Research at Sumitomo International, Global Head of Emerging Markets Research at PaineWebber International, and, before coming to Hermes, Head of Sovereign Research and Strategy at Mizuho International. Neil has 29 years’ industry experience and earned an MA in Economics in 1986 from Manchester University, having the previous year completed his BSc (Hons), also in Economics, from University College Swansea.
Read all articles by Neil Williams