Liabilities and the long-term effects of low rates

We lived through history earlier this month. The Bank of England (BoE) raised interest rates for the first time in ten years. But interest rates will stay low for a lot longer yet and this should encourage those with a long-term view. The move was symbolically important – a small, but significant, reminder that interest … Continue reading “Liabilities and the long-term effects of low rates”

Is this the end of the global cycle?

Markets often have setbacks. There is always plenty to worry about. Recent price falls have not related to any one event or new fact that has emerged. Some people want to take some profits. Some people have become more nervous about how sustainable the recovery might be. Some worry that the Central Banks led by … Continue reading “Is this the end of the global cycle?”

Asian reforms and growth

The Asian economies are growing well, with their stock markets responding favourably to higher company earnings and dividends. Japan in particular has put in a strong performance in recent weeks in the wake of Mr Abe’s victory in an early election. Foreign investors have been keen to back the renewed government as it continues with … Continue reading “Asian reforms and growth”

UK interest rates rise for the first time in a decade

The Bank of England (BoE) raised UK interest rates for the first time since July 2007. The base rate has increased from 0.25% to 0.5%, but we do not believe this necessarily marks the start of an imminent tightening cycle… Although today’s is first interest rate hike in over a decade, the forward guidance provided … Continue reading “UK interest rates rise for the first time in a decade”

Will it be smooth sailing for markets until the end of the year?

Schroders Keith Wade & Aymeric Forest look at whether equities can sustain their stellar run in view of the coming reduction in central bank liquidity, geopolitical tensions, currency moves and stretched valuations? Equities underpinned by solid synchronised global growth The global economy is on a firm and synchronised upward trajectory, which is increasingly industrial-led and underpinned … Continue reading “Will it be smooth sailing for markets until the end of the year?”

Should the Bank of England raise rates?

The Governor has warned us that a rate rise could happen soon. Markets have duly priced in an increase. The pound rallied strongly against the dollar, partly on that interest rate expectation. UK ten year rates and other longer term bond yields have adjusted upwards. The problem is that the economy is slowing. Treasury policy … Continue reading “Should the Bank of England raise rates?”

When economic pessimism means more hikes, not fewer

There has been a striking shift in recent Bank of England (BoE) communication. In the minutes of its September meeting, policy makers noted that “some withdrawal of monetary stimulus is likely to be appropriate over the coming months.” This message was then reiterated in speeches by noted ‘dove’ Gertjan Vlieghe and Bank Governor Mark Carney. … Continue reading “When economic pessimism means more hikes, not fewer”

Inflation is dead, long live inflation

When the Federal Reserve and other central banks introduced quantitative easing in response to the global financial crisis, the loudest and most persistent criticism was that such actions would unleash a major surge in inflation. The reality has been very different. Inflation has persistently fallen short of central bank targets and economic forecasts for the … Continue reading “Inflation is dead, long live inflation”

Bitcoin – instant riches?

Bitcoin is in the news. If you had bought some of this crypto currency at outset you could now cash in a very large profit. Some think that if you bought it at today’s elevated level you could still be in time to make a large profit going forward. It is not something Charles Stanley … Continue reading “Bitcoin – instant riches?”

Currency wars

It’s been a strange world for currencies as well as for bonds and interest rates since the western crash. Countries and central banks that used to worry about their currencies falling too much have all seemed to welcome weakness in their counters, hoping that will stimulate exports and allow a bit more inflation. Four of … Continue reading “Currency wars”

Draghi stalls for time on QE details

The European Central Bank’s (ECB) Governing Council decided to keep interest rates unchanged at their meeting on 7th September.  Importantly, it did not provide any details on the future of its quantitative easing (QE) programme, which is due to end in December. The ECB has typically announced changes in its QE programme three months ahead … Continue reading “Draghi stalls for time on QE details”

Mr Draghi worries about growth

ECB President Mario Draghi brought a surfeit of pessimism to the Jackson Hole meeting of central bankers. He argued that the 2% trend rate of growth for the Organisation for Economic Co-operation and Development (OECD) rich countries prior to the banking crash of 2008 has now halved to a trend rate of around just 1%. … Continue reading “Mr Draghi worries about growth”

Brexit, North Korea and Hurricane Harvey

August is the holiday month and with many key decision makers, in particular, the politicians, away from their desks, it’s normal for things to be a little quieter. Theresa May, for example, took a three-week break for some walking in the Swiss Alps, presumably with the ‘Sound of Music’ on her iPod and ‘Climb Every … Continue reading “Brexit, North Korea and Hurricane Harvey”

Progress of Europe’s banks may mark a turning point

We crave turning points.  As we mark five years since European Central Bank (ECB) President Mario Draghi’s “whatever it takes” speech — which crushed government and corporate bond spreads and contributed towards an 80% rally in eurozone stocks — are we on the cusp of another inflection? The eurozone has just enjoyed its best quarter … Continue reading “Progress of Europe’s banks may mark a turning point”

Fed leaves rates on hold and balance sheet reduction is coming soon

No surprises from the US Federal Reserve (Fed) with interest rates being left unchanged at the meeting last Wednesday. The statement contained some tweaks in wording with job gains now upgraded to “solid” and inflation is noted as “running below 2%”. Meanwhile, balance sheet reduction (the unwinding of quantitative easing) is now expected to take … Continue reading “Fed leaves rates on hold and balance sheet reduction is coming soon”