Despite lingering uncertainty around the next phase of the UK’s exit from the EU, we think that there is more upside for sterling, Gilt yields, and UK equities. The UK is set to leave the EU on 31 st January, but the risk of a disorderly end to the …
24th January 2020
Weakness in economic growth and unfavourable demographics mean that we expect most of the developed world, and China, to experience ‘Japanification’. One of the commodities most affected would be steel, which is why we are bearish on the long-term outlook …
If President Donald Trump were to win a second term, we’d expect both fiscal and monetary policy to remain loose, amid a push to install a more dovish Fed Chair in 2022. There would also be an upside risk of a second, smaller round of deficit-financed tax …
23rd January 2020
As the negotiations over the UK’s new relationship with the EU will be arduous and long, business investment probably won’t rise much this year as firms will worry about the risk of there being something similar to a no deal on 31 st December 2020. But if …
A wave of anti-government protests and a weak economy have increased the likelihood of the finance ministry delivering additional fiscal stimulus in the FY20/21 union budget on Saturday 1 st February. That would provide a small boost to growth over the …
22nd January 2020
We suspect that interest rates will neither go up nor down this year! But the markets may be caught out further ahead if, as we expect, a fiscal stimulus and easing in Brexit uncertainty results in interest rates rising above their current rate of 0.75% …
21st January 2020
Policy loosening will drive a stronger recovery in Turkey’s economy than most expect this year, but this is likely to come at the cost of higher inflation, a widening current account deficit and falls in the lira. That’s likely to force the central bank …
The trade deal between the US and China marks an end to the first phase of the trade war. China’s pledges on imports from the US are unlikely to be met but that may not matter to the deal’s long-term success. It removes the downside risk of imminent …
15th January 2020
The prevailing view that this will be the year when Brazil’s recovery finally shifts up a gear looks overly optimistic. We expect that GDP growth will come in at just 1.5% over 2020, which leaves us close to the bottom of the consensus range. ‘This year …
14th January 2020
The two key economic challenges facing Tsai Ing-wen in her second and final term as Taiwan’s president are the deteriorating demographic outlook and the long-term decline in productivity growth. A combination of the trade war, which is leading some …
13th January 2020
There is little to suggest that President Donald Trump’s deregulatory agenda has provided a significant boost to economic growth. While it may still be too soon to fully judge the impact, the historical evidence suggests that hopes of a more significant …
9th January 2020
Growth in Emerging Asia has struggled over the past year. While most economies should stage a modest recovery over the coming quarters on the back of looser fiscal and monetary policy, with China likely to slow, aggregate growth in the region is set to …
19th December 2019
2020 will be a year in which EM GDP growth edges up and many major central banks catch investors by surprise. This Focus outlines our key calls for next year. 1. Policymakers in China will ease monetary policy significantly as the economy slows . Growth …
18th December 2019
French President Emmanuel Macron’s emphasis on overhauling France’s ailing labour market is long overdue. But while there are signs that the changes are starting to take effect, the labour market improvement since 2015 is mostly thanks to a cyclical …
17th December 2019
After a dreadful 2019, a combination of policy loosening and more decisive measures to deal with problems in the shadow banking sector will push economic growth in India back up to a healthier pace in 2020. And with core inflation set to rise, we think …
Against the CFPB’s expectations, use of the qualified mortgage patch has not declined since it was introduced in 2013. If it is not replaced before it expires in early 2021, we therefore anticipate significant market disruption, and house prices are …
13th December 2019
Our new oil demand proxy provides a timely indication of the health of global oil demand, and lends insight into whether it is demand, or other factors, that is driving prices at any given time. We find that expectations for future oil demand and supply …
The UK general election has provided a clearer path towards a resolution to Brexit and looser fiscal policy, which should boost economic activity and push up sterling, UK equities, and Gilt yields. That said, as long as there remains the possibility of …
China’s property sector is central to its economic performance, its demand for many materials and the stability of its financial system. In this updated and expanded Handbook, we discuss the drivers of the property cycle and answer key questions on …
9th December 2019
There is little evidence that negative interest rates have succeeded in boosting economic growth or inflation expectations. But equally, they do not seem to have done much harm either – many of the criticisms levelled at them have been wide of the mark. …
Set against other asset classes, European commercial property looks fairly valued. Our returns forecasts for 2020-23 of around 5% p.a. on an MSCI all-property basis will look relatively attractive in a multi-asset context. However, comparative total …
Relative to past norms, returns on residential property will underperform over the next few years. But with commercial capital values dragged down by the retail sector, institutional investment in the residential private rented sector will nonetheless …
5th December 2019
In view of the wider interest, this UK Housing Market Focus is made available to clients of the UK Commercial Property service as well. Relative to past norms, returns on residential property will underperform over the next few years. But with commercial …
We do not believe that there has to be a trade-off between preventing global warming and achieving economic growth. Even so, there is a clear risk that the world fails to prevent a significant further rise in global temperatures. Although it is only in …
3rd December 2019
After a sustained upturn in commercial property, yields are well below their historic lows and there are concerns that the current cycle could end as badly as previous ones. But we don’t think a crash is likely yet. Nonetheless, while we expect a rare …
2nd December 2019
In view of the wider interest, this UK Commercial Property Focus is made available to clients of the European Commercial Property service as well. After a sustained upturn in commercial property, yields are well below their historic lows and there are …
The recent strong performance of Central and Eastern Europe (CEE) will probably continue for a few more years as fiscal and monetary policy remain loose. But this is likely to cause some of the pressures and imbalances that have started to build up during …
28th November 2019
The election on 12 th December is likely to mark the beginning of a new phase for the UK economy, determining not only the type of Brexit (or if Brexit happens at all) but also the size and shape of the state. The theme that comes up the most is that …
26th November 2019
The recent weakness in productivity is largely cyclical and reflects the slump in homebuilding. While Australia probably won’t be a frontrunner in the digital revolution, we expect labour productivity growth to pick up from 0.8% over the past decade to …
25th November 2019
South Africa’s public debt burden is not too high, but the direction of travel is very worrying. While the structure of the country’s debts and its deep local capital markets make an acute crisis unlikely, the growing debt pile is another factor pushing …
21st November 2019
In our view, claims that the ECB’s negative deposit rate is weighing heavily on bank lending in the euro-zone are wide of the mark. In fact, we suspect that policymakers will cut the deposit rate even further below zero next year without having major …
19th November 2019
Indonesia’s GDP figures lack credibility – economic growth has been far too stable over the past few years to be believable. We think a better guide to the health of the economy is our own Indonesia Activity Tracker (IAT). This shows that economic growth …
11th November 2019
Although the Office for Budget Responsibility (OBR) won’t expose the full deterioration in the public finances when it updates its forecasts on Thursday, it’s clear that it is only a matter of time before borrowing smashes through the targeted level. That …
6th November 2019
Our central scenario is that cutting interest rates to 0.5% will be enough to weather the economic slowdown in 2020. And if required, fiscal policy and macroprudential tools could be used to help stimulate demand. However, if the global economy slows more …
5th November 2019
The September attacks on oil facilities in Saudi Arabia re-ignited discussion of the “risk premium” in the oil price. Since the risk premium is not directly observable, we have created a methodology to estimate it indirectly . Our model found that, based …
31st October 2019
Three years after the shock announcement that the bulk of India’s bank notes were being withdrawn, any benefits from “demonetisation” should be evident by now. But the promised gains haven’t materialised and the inadvertent economic positives that have …
30th October 2019
As part of its forthcoming review under Christine Lagarde, the ECB is likely to change its inflation target and make its voting system more transparent. Further ahead, it will have bigger issues to resolve, including deciding which tools it could use in a …
29th October 2019
In the near-term, we think that the ongoing consequences of CVAs and the large share of over-rented property will exacerbate the structural reduction in demand for retail property, causing rental values to fall sharply. But, with consumer demand expected …
25th October 2019
Globalisation has probably peaked and could be partly reversed as a result of technological change and protectionist policies. This would have significant implications for asset markets, which have generally benefitted from increased economic and …
24th October 2019
One way or another, the UK is destined for looser fiscal policy. How much and in what form is unclear, but the one thing that is clear is that it will require a new set of fiscal rules. There are many options and we do not know for sure what the …
The recent protests in Lebanon highlight that it is politically impossible to push through the fiscal austerity needed to stabilise the government’s debt-to-GDP ratio. A debt restructuring is inevitable. There are lots of ways that this could play out. …
23rd October 2019
Brazil’s pension reform bill should help to stabilise the public finances and lift a dark cloud over the outlook. The government has a long to-do list of further fiscal reforms, although the political situation suggests that some of these will be delayed, …
22nd October 2019
While the downside risks of a global trade war are often overstated, we think the bigger concern is that the world splits into competing regional blocs that do not cooperate on trade or investment. This could cause global supply chains to splinter and …
Underlying inflation was moored well below the lower end of the RBA’s 2-3% target band even as the housing market was booming and the labour market was tightening. With the unemployment rate set to rise to 5.5% next year and interest rate cuts …
21st October 2019
The rift that has widened between China and the US was caused by China’s emergence as a geopolitical competitor to the US, rather than the personality of Donald Trump. Decoupling will continue whether or not the two reach a deal on tariffs. This may spur …
17th October 2019
The two key economic challenges facing President Joko Widodo in his second term are boosting GDP growth and reducing Indonesia’s external vulnerabilities. We don’t think he will succeed in either. Following his decisive election victory in April, Joko …
15th October 2019
Globalisation has peaked, with any further major integration unlikely. In fact, a policy-driven period of de-globalisation is increasingly likely. Flows of trade and foreign direct investment have flattened off as a share of nominal GDP over the past …
