Markets are ignoring 'major risk' of rising interest rates and end of QE – Citi

Willem Buiter, Citigroup’s chief economist and a leading theorist on monetary policy, in its interview with the UK’s Telegraph, warned that the central banks’ withdrawal of stimulus poses a major risk to the financial markets and that caution should be warranted.

Key Points:

“The air is becoming treacherously thin for global asset markets and investors should start cutting their exposure before central banks shut off emergency stimulus.”

“There are clearly signs of late-cycle froth in financial markets, in everything from equities, to corporate credit, and real estate, especially in the US. There is the risk of an overdue correction.” 

“We are reluctant to call an end to the bull market in risk assets just yet but a considerable degree of caution is now warranted. Downside risks are rising as the business cycle matures.”