The US Congress holds the purse strings and wishes to loosen them

In theory the President sets out a budget in February and the Congress responds with a Budget resolution in May. In practice the Congress runs the budget, and has just passed a two year budget deal regardless of the White House proposals that crossed in the post with their decisions. President Trump’s wish to cut … Continue reading “The US Congress holds the purse strings and wishes to loosen them”

A spot of turbulence

Global markets hit a rough patch in early February. Equity markets sold off, commodities softened, credit spreads widened and capital flowed out of emerging markets as volatility bounced back sharply. There have been a range of explanations offered for this dislocation, from jitters over rising inflation to concerns that rising term premia could snuff out … Continue reading “A spot of turbulence”

What Goes Up…

Some investors may be shocked that stockmarkets can go down considering the extended bull run we have seen in financial markets over the last couple of years. However, given that, as we write, major benchmark market indices are generally showing a decline of around 5% (in local currency terms) for the month; in context, this … Continue reading “What Goes Up…”

The US budget should help economic growth

The Trump administration White House has set out its preferred budget for 2019. It is likely the House and Senate will wish to tone down its dramatic proposals. The President’s wish is to boost military and veterans expenditure substantially, whilst cutting back hard on various other departments and programmes. A 13% increase in defence is … Continue reading “The US budget should help economic growth”

A weak dollar is a tailwind for global growth

The 10% depreciation of the trade-weighted US dollar over the past year is an underappreciated driver of the synchronised upswing in world trade and global economic growth. That’s because movements in the US dollar have global consequences above and beyond movements in any other currency – dollar appreciation tends to crimp global trade and credit … Continue reading “A weak dollar is a tailwind for global growth”

What does a normal interest rate look like?

Markets have been worried that interest rates in the west are heading back to normal in a hurry. If rates go too high too soon they could damage the recovery and do more harm to shares. As the West agonises over the pace of putting up interest rates and winding down special monetary measures, the … Continue reading “What does a normal interest rate look like?”

UK interest rate rises to be earlier and greater than expected

Latest comments from the Bank of England (BoE) and its governor Mark Carney indicate that UK interest rates are likely to go up sooner and faster than previously expected.  UK policymakers’ concerns about inflation have prompted Schroders’ economists to bring forward to November their expectations of a rise in interest rates. Schroders’ Senior European Economist … Continue reading “UK interest rate rises to be earlier and greater than expected”

A healthy correction?

The phrase “healthy correction” is one of the most frequently used in the investment lexicon. It has been ubiquitous over the past few days as a descriptor of the significant falls in global markets. It is also a phrase that has puzzled me over the years. As to “healthy”? Falls of over 4% in a … Continue reading “A healthy correction?”

After the melt up

In January we saw shares rising rapidly, in what some called a melt up. In the last few days they have come back down again very quickly. The year’s gains were rapidly erased. Should we worry? Last week before the fall I wrote that “There will be bad times from time to time. Worrying about … Continue reading “After the melt up”

What has driven stockmarket returns and what will drive them in future?

While the equity markets of various countries and regions have performed very similarly over the past three years, the components of returns have been very different. When we look back over the past three years, investors have earned remarkably similar returns in local currency terms in very different parts of the world. UK, eurozone, Japanese … Continue reading “What has driven stockmarket returns and what will drive them in future?”

Choosing assets for a portfolio

Asset allocation is central to creating a portfolio. The investor has to decide how much, if any, to have in shares, or bonds, or property. Those big picture decisions usually have the biggest impact on how much money you make or lose. At Charles Stanley we spend a lot of time and effort trying to … Continue reading “Choosing assets for a portfolio”

Rebuilding macroeconomics: an intellectual revolution in the making

The severity of the global financial crisis, and the weakness of the subsequent recovery, triggered much soul-searching among the economics profession. The global economy may finally be escaping from the long shadow of the crisis, but macroeconomics has continued to undergo a major reassessment in light of its apparent failure to predict and explain the … Continue reading “Rebuilding macroeconomics: an intellectual revolution in the making”

UK growth edges higher, but BoE likely to hold

The initial estimate of GDP growth for the final quarter of 2017 showed the economy maintained a sluggish pace of growth of 0.5% quarter-on-quarter. This takes GDP growth for 2017 to 1.8%, which is a fall from 1.9% in 2016, and the lowest annual growth rate since 2012. Slight growth pick-up is encouraging Within the … Continue reading “UK growth edges higher, but BoE likely to hold”

One year of Trump

January 20th marked Donald Trump’s one-year anniversary as US President.  So far, his tenure has proved controversial and divisive, both domestically and abroad. His attempts to take credit for the performance of the US economy and equity market should be taken with a pinch of salt, particularly given the considerable momentum carried over from his … Continue reading “One year of Trump”

The challenges of change

When the first electric light switches were installed in the White House in the 1890s, then-president Benjamin Harrison refused to touch them for fear of being electrocuted. For the duration of his presidency, he would ask his staff to flick the switches. Harrison’s aversion is one small example of rational human fear in response to … Continue reading “The challenges of change”