Central bank policies make it harder to understand risk


The policies of quantitative easing and record low interest rates make it very difficult for advisers and clients to understand the risks they are taking when making an investment, according to the guests on the latest FTAdviser podcast.

Bertie Dannatt, investment director at Ruffer, said those policies have made the true value of an asset harder to understand, meaning it is more difficult to understand risk. 

He said: “The policies that central banks have used to stimulate markets since the financial crisis have definitely pushed up the prices of bonds, shares and property and it has been a rising tide lifts all boats effect.”

His fellow guest Jordan Sriharan, of Canaccord Genuity Wealth agreed, saying, “the policies have basically put an artificial floor on bond yields, and that effects the price of so many other assets.

"But bond yields have been on a downward trajectory for 30 years, so we shouldn't forget that there is a long-term trend at work as well as the shorter term factors." 

The guests also discussed the merits of investing in bonds and the US stock market.

To listen to the full podcast, click on the link above. 

FTAdviser's podcasts are also available on Acast and are available to download on iTunes.