“The resulting low interest rates, debt piles and heavy financial market reliance on policy support could lead to large distortions of economic decisions, macro instability and market fragility,” Lim said in a GIC Insights report released on Friday. “We expect the economic environment to be volatile and challenging.”
Most emergency spending and lending have gone toward relieving short-term pressures and are a liquidity bridge, he said, adding that solvency remains an issue.
As to how investors need to adapt and adjust to the resulting wide dispersion of outcomes, Lim suggested looking under market aggregates and indices more thoroughly, as important risks and opportunities may be hidden in them.
