Pain comes before the gain

Pain comes before the gain

Weaning the world's equities off the massive stimulus measures unleashed by the US central bank will be like getting an addict off drugs, according to a senior Swiss banker.

But Mr Alexander Friedman, global chief investment officer of UBS, added that the considerable short-term pain will likely be followed by long-term good.

He told The Sunday Times: "If you're addicted to a drug, people will tell you you need to get off the drug in order for your life to get better.

"But if you really are addicted, even if you know you have to get off it, you don't want to. And that's kind of how the markets are functioning."

Mr Friedman, who was in Singapore for an investment conference for some of the world's wealthiest family offices, noted that financial markets across the world are focused on the next move by the US Federal Reserve.

The key phrase is "tapering off" - a reference to Fed chairman Ben Bernanke's comments last month that its huge bond purchases may be slowed down if the US job rate improves.

The Fed has been buying US$85 billion (S$106 billion) in bonds a month to kick-start the sluggish economy, a monetary policy called quantitative easing (QE).

That flood of cash also flowed to global share markets, including Singapore's, but the improving US economy has raised fears that the tap is about to be turned off. Share prices have dived amid the uncertainty.

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