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?”

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”

Supercharged: the car industry in a post-oil world

Governments around the world, barring a handful of exceptions, are seeking to limit the effects of climate change caused by burning fossil fuels. Earlier this year, some 200 countries signed the Paris Agreement, which commits them to help curtail global temperature rises. Part of the solution lies in promoting fuels that produce less of the … Continue reading “Supercharged: the car industry in a post-oil world”

Markets shrug at May’s Florence speech

Theresa May’s speech confirmed that the UK is seeking a transition period but gave few further details on the final shape of Brexit. Investors had hoped that Prime Minister Theresa May’s Florence speech would be the factor that pushed Brexit negotiations forward. However, the speech was a slightly softer version of her Lancaster House speech … Continue reading “Markets shrug at May’s Florence speech”

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”

The US Fed must learn from mistakes of the crisis

A decade is a long time in central banking. Ten years ago Ben Bernanke used his speech at the Jackson Hole symposium for central bankers to explain the tumult that was rippling through financial markets at the time. He explained that while there were problems in the US housing market, the global financial system was … Continue reading “The US Fed must learn from mistakes of the crisis”

Broken-hearted again …

Having raised interest rates by 0.25 percentage points in June, the Federal Open Market Committee has indicated that it expected to hike rates once more this year and that it plans to begin its balance-sheet normalisation program (its plan to sell off the assets that it purchased under quantitative easing) “relatively soon”. In the UK, … Continue reading “Broken-hearted again …”

What’s wrong with low interest rates?

Interest rates are low, but is this a problem?  After all, in times gone by the worry was that rising interest rates killed off economic expansions. You know the story: inflation picks up as economic slack diminishes; central banks slam on the brakes; and recession follows. Since the global financial crisis, however, interest rates (and … Continue reading “What’s wrong with low interest rates?”

Brazil and Venezuela struggle with their economies

Since 2014 the output of the Brazilian economy has fallen by 9%, before starting a small recovery this year. Meanwhile in its smaller northern neighbour, Venezuela, the government has stopped producing official economic figures because the performance of the economy is so poor. The IMF thinks the Venezuelan economy contracted by 8% in 2016 alone, … Continue reading “Brazil and Venezuela struggle with their economies”

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”

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”