What can we learn from the shape of the yield curve?

Surveys of investors show a distinct degree of nervousness this summer. One reason may be President Trump’s propensity for off-the-cuff Twitter activity, taking aim at Turkey, NATO, and Iran, the global trading system or any of his other enemies. Another explanation is rather more technical – prosaic, even. But it also illustrates how caution about … Continue reading “What can we learn from the shape of the yield curve?”

Turkey trouble: what’s behind it and what does it mean for emerging markets?

Turkey’s currency, the lira, has plunged 68% against the dollar since the start of 2018. Year-to-date its stock market has fallen nearly 18% and inflation hit 16% in July, more than three times the central bank’s target. Turkey’s current crisis has been a long time coming. The early warning signs were apparent in the 2013 … Continue reading “Turkey trouble: what’s behind it and what does it mean for emerging markets?”

New Fed chair Powell raises rates, growth and inflation forecasts

As expected the Federal Reserve (Fed) raised interest rates by 25 basis points at the March Federal Open Market Committee (FOMC) meeting. The move increases the target range for the federal funds rate from 1.25%-1.5% to 1.5-1.75%. At his first FOMC meeting, new Fed chair Jerome Powell also announced that the committee is pushing up … Continue reading “New Fed chair Powell raises rates, growth and inflation forecasts”

Down But Not Out

February started where January left off – providing investors with a timely reminder that global markets fall quicker than they rise. Strong US employment numbers and evidence of wage growth fuelled investor concerns over inflation and the prospect of a more aggressive US interest rate cycle. This led to a sharp sell-off in equity markets … Continue reading “Down But Not Out”

What Goes Up…

Some investors may be shocked that stockmarkets can go down considering the extended bull run we have seen in financial markets over the last couple of years. However, given that, as we write, major benchmark market indices are generally showing a decline of around 5% (in local currency terms) for the month; in context, this … Continue reading “What Goes Up…”

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”

After the melt up

In January we saw shares rising rapidly, in what some called a melt up. In the last few days they have come back down again very quickly. The year’s gains were rapidly erased. Should we worry? Last week before the fall I wrote that “There will be bad times from time to time. Worrying about … Continue reading “After the melt up”

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”

UK growth edges higher, but BoE likely to hold

The initial estimate of GDP growth for the final quarter of 2017 showed the economy maintained a sluggish pace of growth of 0.5% quarter-on-quarter. This takes GDP growth for 2017 to 1.8%, which is a fall from 1.9% in 2016, and the lowest annual growth rate since 2012. Slight growth pick-up is encouraging Within the … Continue reading “UK growth edges higher, but BoE likely to hold”

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”

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”

Fed raises US rates once again

The US Federal Reserve (Fed) raised its key interest rate by 0.25 percentage points at its December meeting. It is one of Janet Yellen’s final major acts as head of the US central bank.  The Fed left its rate outlook for the coming years unchanged from its projections in September.  This is the fifth increase … Continue reading “Fed raises US rates once again”

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”

Jay Powell nominated as next Fed Chair

President Trump has nominated Jay Powell as the next Chair of the US Federal Reserve. This was largely expected, despite Trump’s hosting of a somewhat convoluted selection process (involving a promotional video), which saw numerous candidates briefly take the role of favourite. The official changing of the guard occurs at the start of February next … Continue reading “Jay Powell nominated as next Fed Chair”