by Shawn Langlois
‘What if I suggest the coronavirus, and the consequences of the response, will spell the effective end for financial asset markets — bonds and equity? What if I think that’s probably a good thing?’
That’s the provocative question Bill Blain, strategist at London-based Shard Capital, posed to investors in a Tuesday “Morning Porridge” blog post.
The argument, he wrote, is simple.
“The repression of interest rates to zero and negative real yields has become an absolute disincentive to invest in them,” Blain explained. “The search for yield has pushed investors to take more risk — buying increasingly high-risk corporate debt at lower and lower yields. The effect has been to make businesses less and less efficient as they gorge and grow flabby on cheap debt, while pushing up their stock prices through buy-backs.”