Monetary Policy
A benign disinflation will support equities over the next few quarters. Stocks will fall next year as a recession begins when investors least expect it.
In this report, we follow up on the upgrade to our US duration stance from last week with a review of our rates views and government bond allocations outside the US. We conclude that while we now find US Treasuries to be more attractive from a value perspective, even better value is available in euro area and UK government debt.
Symptoms of a liquidity trap for Chinese households are appearing. Our proprietary indicators for the marginal propensity to spend among households and enterprises continue falling. There has been a paradigm shift in Beijing’s approach to policy stimulus. Authorities will be slow to introduce large stimulus. Hence, China-related financial markets are set to fall further.
The Reserve Bank of New Zealand hiked rates this week to 5.5%. There are many reasons to expect that to be the last rate hike for this cycle – a development that is positive for New Zealand bonds but bearish for the New Zealand dollar.
The Reserve Bank of New Zealand hiked rates this week to 5.5%. There are many reasons to expect that to be the last rate hike for this cycle – a development that is positive for New Zealand bonds but bearish for the New Zealand dollar.
Financial commentators, politicians and policymakers have increasingly been blaming stubbornly high inflation on companies pursuing aggressive pricing strategies to boost earnings and margins. In this Special Report, we investigate the concept of “greedflation” – companies persistently raising prices faster than costs are increasing to pad profit margins - and see if the associated conclusions about corporate pricing power and inflation are borne out by the data in the US, euro area and UK.
Global growth will weaken in the coming months, yet monetary authorities worldwide will be reluctant to ease policy. This state of affairs foreshadows a clash between markets and policymakers in the months ahead. China’s recovery is losing steam. The latest divergence between Emerging Asian and LATAM currencies will not last.
The ECB continues to focus on lagging indicators and risks once again to cause a policy error that unduly hurts European growth. What does it mean for investors?