Global Investment Views - August 2019

Friday 26 July 2019

Research / Market

Testing new records

Financial markets have been enjoying a record-breaking run of late. The tide that lifted all boats was the new wave of ultra accommodative monetary policy, at this stage announced but not yet delivered. The conviction that central banks (CBs) will step in again to avoid an excessive deterioration of the economic outlook, in the absence of any material sign of inflation, was the main driver of the recent rally. The overall narrative in the market is that the glass is half full. The economic cycle will be extended by CBs, interest rates will remain lower for longer and risk assets will remain well supported: credit and EM by the hunt for yield, and equities by the repositioning of investors that are late joining the party. This is all taking place against a backdrop where overall, valuations are less compelling than they were at the beginning of the year, although are not too stretched. All good then?

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Global Investment View
31/01/2020 Research / Market

Global Investment Views - February 2020

At the start of the 2020s, markets continued to be dominated by geopolitical issues, with short-lived Iran tensions at the forefront initially, followed by the news regarding a phase one trade deal between the US and China. Now, growth expectations are becoming the main driver of the market. That’s why the recent volatility due to the news about the spreading of the corona virus in China is higher than in the case of US-Iran tensions, as the epidemic could harm China (and global growth) if not contained soon (not our base case at the moment). Other than this issue, recent data point to a ‘so far, so good’ assessment as Germany has avoided a recession and the Euro area is bottoming out. Inflation uptrends are materialising to some extent, but risks appear to be limited and the overall inflation outlook remains benign. Central banks are likely to continue to pause on policy changes, which should help to maintain dovish financial conditions across regions. Therefore, in the search for further growth, attention is globally moving towards fiscal measures: Japanese stimulus package; approval of 2020 Budget Laws for Indonesia, the Philippines and India; and hopes for support in Germany, the UK and broader Europe (€1tn European Green Deal).