The IMF and World Bank must evolve to remain relevant

It is hard to square a US President bent on protectionism with two institutions that have been a bulwark for free trade for over 70 years. The Bretton Woods institutions, as the World Bank and International Monetary Fund (IMF) are known collectively, were created during the Second World War to support the post-war economic and … Continue reading “The IMF and World Bank must evolve to remain relevant”

Millennials will reshape the investment landscape

Millennials are the largest generation that have ever existed. They are expected to make up 75% of the global workforce by 2025 and the way they spend their money will define the world over the course of the next few decades. With half of the world’s population currently under the age of 30, the values … Continue reading “Millennials will reshape the investment landscape”

What causes recessions, and can we predict them?

The US economic expansion has just become the second longest on record. If it continues beyond mid-2019, it will be number one. Its longevity is probably due to a mixture of circumstances, judgement and luck. The severity of the recession following the global financial crisis (GFC), coupled with the slowness of the subsequent recovery, has … Continue reading “What causes recessions, and can we predict them?”

Trade deficits and tariff wars

President Trump believes that if you are running a large deficit it should be easy to “win” a trade war. The problem with this argument is the EU and China may decide to engage. In 2016 the US ran a deficit of $505bn on trade in goods and services, according to the World Bank. Germany … Continue reading “Trade deficits and tariff wars”

Trump’s tariffs

Last week, the White House announced tariffs on imported steel and aluminum of 25% and 10% respectively – a move that sparked global indignation and threats of a trade war. But tariffs are more common than you may imagine. Almost every US president since Ronald Reagan has announced a tariff of one kind or another. … Continue reading “Trump’s tariffs”

A spot of turbulence

Global markets hit a rough patch in early February. Equity markets sold off, commodities softened, credit spreads widened and capital flowed out of emerging markets as volatility bounced back sharply. There have been a range of explanations offered for this dislocation, from jitters over rising inflation to concerns that rising term premia could snuff out … Continue reading “A spot of turbulence”

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”

The changing shape of the world economy

Sometimes as an investor it is a good idea to look at the big picture and the long term view. It is easy getting involved in day to day or week by week movements and topical controversies. Much of this is just noise in the system, a temporary high or a short term disappointment. The … Continue reading “The changing shape of the world economy”

Farewell to 2017

Is it better to travel than to arrive?  The US share market has done well this year.  It has been in fitful anticipation of tax cuts to come.  As the old year draws to a close the tax cuts have as we expected taken legislative form. The US growth rate has risen, exceeding 3% as … Continue reading “Farewell to 2017”

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?”