Will negative interest rates in the UK trigger an investor top-up?

By Nigel Green. Published at Feb 5, 2021, in Features

The Bank of England’s threat of negative interest rates will encourage market-wise investors to increase their exposure to UK stocks, says Nigel Green CEO of one of the world’s largest independent financial advisory organisations, deVere Group.

The UK’s central bank on Thursday committed to leaving interest rates unchanged at 0.1% and maintaining its agenda of quantitative easing (QE) – the BoE’s programme buying government bonds and corporate bonds.

The UK’s benchmark fell on the Bank of England’s "unusually uncertain" outlook for the economy. This is a predictable knee-jerk reaction from the markets.

For the time being, the BoE avoided taking the plunge into negative interest rates, instead deciding the less risky measure is to maintain the Bank’s £895 billion quantitative easing (QE) programme.

However, it is clear that as the Bank tries to bolster the pandemic-stricken British economy, negative interest rates remain part of the ‘tool kit.’

Indeed, they have been very deliberate in not taking this highly controversial option off the table.

Should the BoE decide ultimately to take rates below zero, as already tried in the European Union and Japan, it would be the first time that they have done so since the Bank was founded in the 17th century.

Question marks remain as to whether negative rates would achieve the primary aim of supporting the economy.

This is because the move could be viewed by consumers and investors that the economy is in a perilous position and, as a result, trigger a serious drop in consumer and investor demand.

Whilst the debate on whether negative interest rates help the ‘real economy’ or not will continue, there is no doubt that they would help boost financial asset prices.

With this now front and centre in their minds, investors will now be looking to top-up their portfolios before the next round of cuts and the likely subsequent price increase. They’ll be moving to capitalise on the lower entry points now before the next significant rally.

In addition, those with savings in the bank are already getting no return thanks to the ultra-low interest rates. The threat of negative rates will offer them more reason to increase their exposure to stocks.

It’s my view that with the economy how it is, and the hint-dropping from Bank of England, rate cuts are looming as it’s increasingly clear that the quantitative easing agenda is not sustainable.

This will push up financial asset prices and, as such, many investors will be wanting to get ahead of the curve and build on their wealth. The best way, as ever, is to bolster portfolios, ensuring they are properly diversified across asset class, sector, region and currencies.


View Our Investment Portfolios


S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why Finfeed.com is Australia’s leading small cap publication

Founded seven years ago, Finfeed.com is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise.

Finfeed.com provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more.

Finfeed.com is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!

X