[SINGAPORE] The US Federal Reserve is likely to resort to quantitative easing if there is a crash in risk assets such as equities, said GIC adviser Jeffrey Jaensubhakij.
The potential for a return to such monetary easing policy is helping to drive a surge in gold prices, Jaensubhakij said at the Bloomberg Investment Management Summit in Singapore on Tuesday (Oct 7).
“If they are in a bubble and they burst – is the Fed actually going to do QE to the power of X again?,” Jaensubhakij asked. “I think there’s a strong likelihood of that happening,” which would provide a cushion for the commodity, he said.
Jaensubhakij is the latest veteran investor to comment on the “debasement trade,” which has fuelled a surge in haven assets like gold as concerns mount over the fiscal outlook for major economies including the US. He also warned of an end to a “confusing” concurrent surge in the value of risk assets like stocks after US President Donald Trump’s “Liberation Day” tariffs in April.
The dual increase is being fuelled by the belief that “policy is going to come to the rescue of anything and everything,” along with one of the fastest global rate-cut cycles ever, Jaensubhakij said.
“That anticipation of the volatility to come is something that will come closer and closer into the markets’ face over the next few months, because it can’t continue in this way.”
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Quantitative easing involves a central bank pumping money into the economy by purchasing assets including government bonds, putting pressure on the value of the currency.
Jaensubhakij stepped down from the GIC’s chief investment officer role in April, although he remains an advisor at the fund that is estimated by Global SWF to manage US$936 billion in assets. His successor Bryan Yeo last week voiced concerns about growing country debt burdens and a “hype bubble” in artificial intelligence venture investing.
Jaensubhakij said investors need to ask if they can generate the same returns from AI bets as capital expenditure increases, and how such spending can be financed. More broadly, he warned that rate cuts are “juicing the markets.”
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