Are markets underestimating geopolitical risk?

Every week it appears that North Korea tests a missile that falls safely in the Sea of Japan. Saudi Arabia and its close neighbour Qatar are having a spat about terrorism funding, could they come to blows and what would that mean for the oil price? Should we worry about such events? And how will … Continue reading “Are markets underestimating geopolitical risk?”

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”

Could politics structurally alter the economic backdrop?

With 5 July having marked ten years since the Bank of England (BoE) last raised UK interest rates, we assess the state of the economy and its prospects in light of recent political developments. Although the UK economy has shown resilience since last year’s Brexit referendum, its growth rate decelerated in the first quarter of … Continue reading “Could politics structurally alter the economic backdrop?”

Chinese growth beats forecasts but looks set to slow

Chinese growth once again surpassed expectations in the second quarter, growing 6.9% year-on-year (y/y), unchanged from the first quarter. This should ease fears over the ongoing credit tightening in China, though we still expect a growth impact to come through in the second half of this year. Manufacturing growth accelerates A key contributor to the … Continue reading “Chinese growth beats forecasts but looks set to slow”

Curve ball

Governments aren’t the only things proving to be less than strong and stable these days. Take the Phillips Curve, which describes the relationship between unemployment and wage growth. As unemployment falls, using up spare capacity in the labour market, it makes intuitive sense that wage growth starts to pick up. Given the key role played … Continue reading “Curve ball”

A-Shares: All Quiet on the Eastern Front

Two years ago this month (June) China’s A-shares (shares that trade on the Shanghai and Shenzhen stock exchanges) reached their highest level since the global financial crisis, after rocketing almost 80 per cent in six months. The market then slumped more than 43 per cent over the subsequent 11 weeks. Shares of companies that are … Continue reading “A-Shares: All Quiet on the Eastern Front”

A pleasant surprise from President Trump

It’s fashionable to write off President Trump. His healthcare reform has been slowed by strong opposition, his tax reform has been delayed, and now he is being investigated over his links with Russia and the removal of the FBI Head from office. The market has wobbled over these difficulties. Meanwhile President Trump has turned his … Continue reading “A pleasant surprise from President Trump”

Can Japan’s reforms change the game?

Two economies are associated in investors’ minds with the need for reform. In Japan, Mr Abe is well entrenched with a big majority behind his “three arrows” reforms. Designed to accelerate Japanese growth, the third arrow offered substantial changes to the way Japanese society functions and the way Japanese companies work. In India, many in … Continue reading “Can Japan’s reforms change the game?”

Japan: a leveraged play on global growth?

Japan’s nascent economic recovery is showing encouraging signs, with some strength in the labour market and a favourable corporate environment. However, domestic demand remains weak and it appears that cultural headwinds will have to be addressed before a virtuous circle of rising domestic demand and inflation can begin. Meanwhile, Japan’s asset markets are being distorted … Continue reading “Japan: a leveraged play on global growth?”

Theresa May announces UK general election

This morning, UK Prime Minister Theresa May announced the government’s intention to hold a snap general election on 8 June 2017. Parliament will vote to set a date for the election tomorrow, needing a supermajority of two-thirds in favour to pass, although this is expected with the opposition leader Jeremy Corbyn having already welcomed the … Continue reading “Theresa May announces UK general election”

Is populism good for markets?

Populist policies appear good for markets, given the performance of equities following the Brexit and Donald Trump votes. However, we would note that the conditions for a rally (dovish signals from the Federal Reserve (Fed) and signs of a global recovery) were already falling into place last summer, before either of these two events took … Continue reading “Is populism good for markets?”

How far will inflation and interest rates rise?

In February the US inflation rate as measured by the CPI hit 2.7%. In the UK the rate reached 2.3%. The US dollar had strengthened over the previous year, whilst the pound had weakened. Both economies were affected by rising oil and other commodity prices. In the USA the arrival of higher inflation led to … Continue reading “How far will inflation and interest rates rise?”

Why Trump makes the case for emerging markets

Donald Trump’s first weeks as US president are turning out to be just as controversial as his bruising election campaign. A flurry of executive orders on border controls, trade and healthcare has dominated headlines, causing dismay and galvanising opposition. The drama unfolding on a daily basis makes the modest comeback that developing markets have been … Continue reading “Why Trump makes the case for emerging markets”

A decade to forget for savers

It is a decade since the start of the financial crisis. What started in the US housing market later engulfed the global economy and is having an enduring legacy on the UK – perhaps most notably on savers. The first signs of the financial crisis emerged in April 2007 when New Century Financial, a US … Continue reading “A decade to forget for savers”