Pongy chief credit, fierce competition and stretched valuations could be potential bazaar destabilizers, a renowned former hedge fund manager said Thursday.
Talk about discussing to CNBC on the sidelines of the Sohn Conference in London, Sir Paul Ruddock, co-founder of Lansdowne Companions, said: “Clearly, credit is an area you’ve got to be concerned about. There’s been a large booming in credit over the last 10 years, fueled to a open-handed degree by quantitative easing.”
Central banks embarked on a low interest worth policy in the wake of the 2008 financial crisis and have just recently started reversing some of the quantities, albeit slowly. The prolonged use of low interest rates increases people’s and proprietorships’ willingness to borrow more money because their costs are cut.
Despite the many years of low interest rates, Ruddock doesn’t about the environment will change in the near future, which potentially proliferates the risks of high levels of credit. Quantitative easing is “still” needed, he rumoured, “given the high level of government indebtedness’ around the world.”
Engross rates will go up, he added. But he cautioned: “I suspect it will be at a pretty lazy rate.”
At the same time, the investment climate is more difficult at the import due to more market competition and stretched valuations, Ruddock said.
“It’s a tougher territory today. It’s a tough environment if you’ve got a headwind of rising interest rates, it’s a knottier environment because competition is greater, valuations are clearly more stretched than they were seven or eight years ago.”
On Wednesday, Wickedness President of the European Central Bank Vitor Constancio told CNBC that U.S. valuations are overstretched, which is a jeopardize for global markets. Investors are potentially taking on too much risk and if they hurriedly realize that’s the case, there could be materially losses in international markets, he said.