Although the risk of decline in ultra-accommodating monetary policies may be cited on a regular basis, and market apprehensions can be appeased as inflationary menace is on the retreat, the experience of Japan in the wake of its own recession in the early 1990s should be borne in mind, according to Carmignac Gestion.
Since the summer of 2012, stock markets have been buoyed up by the abundance of liquidities, the waning of systemic risk and the perception of a slight economic improvement in the US, which has benefited the rest of the world, said Didier Saint-Georges, member of the Investment Committee of Carmignac Gestion.
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But in Europe in particular, the slow-down in price rises comes now with persistent economic recession, spiralling unemployment and an inability to reduce the level of public debt.
According to Saint-Georges, Europe would do well to avoid the quagmire of chronic deflation by drawing three lessons from the Japanese experience:
-deflationary trends should not be allowed to take root;
– Europe must have the courage to pursue ambitious policies; and
– Europe’s efforts must be coordinated
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