Goldman’s Waldron Says Markets Overestimate ECB’s QE Plans

(Bloomberg) -- Investors have overestimated the European Central Bank’s quantitative easing plans and they could be forced to watch asset prices fall, Goldman Sachs Group Inc. President John Waldron said.

Monetary policies and U.S.-China trade tensions have become driving forces for much of the market, with data showing investors are increasingly defensive, Waldron said at the Singapore Summit on Saturday.

“There’s really now all eyes on the Fed and the ECB and the other central banks to really propel asset prices further from here and, if you don’t get reasonable outcomes in monetary policies versus what expectations are, asset prices are probably at risk of coming down,” he said. “It doesn’t seem to me that the trajectory has been to deepen QE as much as the markets may expect, so I do think the monetary policy response has kind of run its course.”

While the U.S. dollar will likely remain the main currency of global commerce, Waldron also backed the internationalization of the Chinese yuan.

Doing so “is an important development and would go part and parcel with the development of a broader capital market, more FDI [foreign direct investment] and more international flows,” he added.

The bank has observed increasing levels of hesitation about investing in China amid rising global tensions.

“There has been disinvestment from China from global asset allocators,” he said, while adding that not all players were pulling out. “And there’s been investment in the U.S., interestingly, in terms of flows -- maybe that’s a safety mechanism.”

To contact the reporter on this story: David Ramli in Singapore at dramli1@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Garfield Reynolds, Victoria Batchelor

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