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”

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?”

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”

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”

Investors should prepare for a thaw

I was recently in New York. While the snow and freezing temperatures ensured there was a chill in the air, my bigger worry was the air of complacency among investors. Like other stock markets around the world, the S&P 500 and Dow Jones were recording all-time highs. Meanwhile, the much followed VIX index has been … Continue reading “Investors should prepare for a thaw”

How do you say déjà vu in Spanish?

Actions will speak louder than the words for Latin America’s populists in 2018. Nearly two out of three Latin Americans will choose a new leader over the next 12 months. Chile and Honduras have kicked off the year-long cycle. Brazil, Colombia, Costa Rica, Mexico, Paraguay and possibly Venezuela will follow next year. Observers are worried … Continue reading “How do you say déjà vu in Spanish?”

Artificial intelligence: finding opportunities amid the rise of the machines

As artificial intelligence (AI) moves from the realms of fantasy to reality, it brings both opportunities and threats for investors in 2018. The possibilities of AI were underscored in 2015 when Google DeepMind’s AlphaGo program triumphed over the reigning world champion in Go, a Chinese board game of profound complexity. In 2017, DeepMind announced that … Continue reading “Artificial intelligence: finding opportunities amid the rise of the machines”

China points to the financial future

Last time I was in Beijing, I stopped to buy some sausages from a street vendor outside the Forbidden City.  They cost only a couple of yuan, yet the lady selling them was happy to take payment on her phone using the Alipay app. I don’t know what she did with the proceeds. But she … Continue reading “China points to the financial future”

Keeping the faith: now is not the time to abandon inflation targets

Monetary policy is at an inflection point. The extraordinary support from central banks is being gradually scaled back as economies improve and financial markets remain calm. Yet investors remain sceptical about how much central banks will raise interest rates by, because inflation remains stubbornly low across most of the advanced world. Historically, declining unemployment has … Continue reading “Keeping the faith: now is not the time to abandon inflation targets”

Exchanges and the companies quoted on them – surely it’s different this time?

Although it is not the oldest stock exchange in the world, the London Stock Exchange can trace its lineage back more than 300 years. The earliest stockbrokers were debarred from London’s centre of commerce, the Royal Exchange, because of rowdiness. Instead, they began to congregate at Jonathan’s Coffee-House on Change Alley. Here, one of the … Continue reading “Exchanges and the companies quoted on them – surely it’s different this time?”

US tax cuts: do the sums add up?

The US Senate recently passed its tax bill supporting the Trump administration’s tax reform measures, which call for a $1.5 trillion net tax stimulus. Supporters of these tax cuts have argued they will result in stronger economic growth, as did the tax cuts of Ronald Reagan in the 1980s and George W Bush in the … Continue reading “US tax cuts: do the sums add up?”

Signal or noise? Political risk in 2018

Proliferation of weapons of mass destruction. Terrorism. Populism. A newly emboldened Russia. The world is an unsettled place, but financial markets are relatively calm. A few factors could yet jolt them. US equity markets have generated significant gains over the last year, despite the headlines speculating over possible Russian interference in the US presidential election, … Continue reading “Signal or noise? Political risk in 2018”

Where should investors look for opportunities in 2018?

After a turbo-charged 2017 investors have become nervous of a market sell-off. Among the signs: technology stocks have wobbled recently; high yield corporate bond spreads – the risk premium corporate bonds provide over government bonds – have narrowed to levels not seen since the financial crisis; and speculation has driven a bitcoin frenzy. But while … Continue reading “Where should investors look for opportunities in 2018?”

Be careful counting your chickens

Hopes are high for the OPEC meeting on 30 November. A programme of cuts to supply that was initiated last year by OPEC and some non-OPEC members (we’ll refer to the two collectively as ‘OPEC/NOPEC’) has resulted in the oil price steadily rising from its lows to just short of $60 a barrel at the … Continue reading “Be careful counting your chickens”

Budget November 2017: Third time lucky?

If the Chancellor suffers from claustrophobia, he’ll have been having a hard time of it in recent weeks. Mr Hammond has been hemmed in on one side by sobering economic and fiscal forecasts; on another by public services and national infrastructure showing the strain after seven years of austerity; and on a third by members … Continue reading “Budget November 2017: Third time lucky?”