How China is positioning for slower growth

The Chinese authorities seem to have acknowledged that lower growth will be inevitable. We look at how they have increased their room for manoeuvre economically and politically. The National People’s Congress (NPC), China’s national legislature, met from 5th to 20th March. This conference traditionally provides the senior leadership group with the opportunity to set policy … Continue reading “How China is positioning for slower growth”

Blue skies for communist China?

China is attempting to develop a more rounded and richer economy, with more coming from services and higher value added activities – a difficult balancing act. China’s achievement under President Xi, as under his immediate predecessors, has been impressive. According to the World Bank China now has the world’s largest economy as measured in Purchasing … Continue reading “Blue skies for communist China?”

Italian election yields a bitter stalemate

Italy is not usually known for its political stability, so the results of its general election come as no surprise. The bitter and divisive contest yielded no overall winner, but the swing towards populist extremist parties could be a concern. Based on exit polls, the anti-establishment Five Star Movement appears to be the single biggest … Continue reading “Italian election yields a bitter stalemate”

Will the US infrastructure plan be effective?

The United States (US) presidential plan is to raise $1.5trn to $1.7trn to spend on US infrastructure over the course of the next ten years. The proposed plan aims to restructure the permitting process, which is currently inefficient and may have actually disincentivised investment efforts. Where is the money coming from and what will it … Continue reading “Will the US infrastructure plan be effective?”

Forces of nature: the emerging solar and wind revolution

In north-western China’s arid Tengger desert lies a spectacular city. Not one of buildings but solar panels, and millions of them. This “Great Wall of Solar” covers 1,200km2 – only 100km2 less than Los Angeles. It is the latest development in China’s aspiration to be the world’s leader in solar power. The renewables revolution is … Continue reading “Forces of nature: the emerging solar and wind revolution”

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”

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?”

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”