Stock markets in Europe, the US, Japan and China have all been influenced by quite different driving forces. Those sectors in share indices that are generating the profits vary from one region to the next; much the same can be said for earnings growth estimates.
In an environment of zero risk-free rate of return and intense exploitation of anomalies to produce independent market returns, alternative strategies must more than ever be nested within the asset allocation as a whole, rather than considered separately as satellite around a conventional core of portfolio assets.
All in all, the ECB’s announcements on Thursday were below expectations. The 25bp rate cut had been widely expected. Despite Mario Draghi’s assertions, it is unlikely that this cut will have a decisive impact on economic recovery and on banks’ financing costs.
For investors, in a context of deflation, caution calls to focus on good balance sheets (sovereign as well as private) and to concentrate in companies able to grasp growth where it is, such as companies exporting in fast growing markets.
The Ifo business climate index rebounded markedly from 104.4 in April to 105.7 in May, well above expectations as the consensus was for an unchanged outcome. The rebound was entirely based on the ‘current assessment’ which rebounded from 107.3 to 110.0 in May whereas the ‘expectations’ component remained flat at 101.6. A rebound led by [...]
On more than one occasion in recent Perspectives articles, we have alluded to the 3GDs and our definitions of what they are. They describe three quite differing and distinctive driving forces influencing developments in Europe, the US and the emerging world, spearheaded by China. At this juncture, we see no reason to rewrite our scenarios [...]
The TOPIX share index is up 34% for the year to date. This powerful rally does beg two questions though: How much more upside potential do Japanese shares have? Does this mean Japan will at long last throw off the shackles of deflation in the longer run? After several very disheartening years, Japanese shares have [...]
Monthly data published at the end of last week confirmed that the federal budget deficit has fallen very rapidly. Over the first seven months of fiscal year (FY) 2013, i.e. from October 2012 to April 2013, the deficit reached $487.6bn, 32.3% less than over the same period a year before. This sharp improvement was mainly linked to a surge [...]
Eurostat’s preliminary estimate showed that real GDP dropped by 0.2% q-o-q in Q1 (-0.9 % q-o-q annualised), worse than consensus expectations (-0.1% q-o-q) and after a contraction of 0.6% q-o-q in Q4. With this sixth consecutive quarter of decline, the euro area is experiencing its longest-lasting recession since the post-war period. Heterogeneous figures in core [...]
Hedge funds may have been the winners in the bear market of 2002, but in the crisis of 2008 they were among the biggest losers. Locked in to losses by “gates” and other “side-pockets”, private investors have been disappointed by their performance in the market rally over the past four years. Today aversion to liquid [...]
Total industrial production fell by 0.5% m-o-m in April, further than the consensus estimate (-0.2%). Moreover, the rise recorded in March was revised down from +0.4% to +0.3%. Part of this weakness was explained by a widely expected contraction in the production of utilities (-3.7% m-o-m), following a surge in March (+6.4%), amid exceptionally cold [...]
Yesterday’s retail sales numbers were surprisingly positive. Nominal retail sales inched up by 0.1% m-o-m in April, well above consensus expectations (-0.3%). The figure for March was revised down from -0.4% to -0.5%, but the one for February was also revised up by 0.1% (from +1.0% to +1.1%). As expected following the sharp m-o-m decline [...]
Against the fall expected by consensus (-0.1% m-o-m and weak industrial surveys1), German industrial production increased by 1.2% m-o-m in March. The rise was the second consecutive monthly gain. The February figure was revised up marginally from 0.5% m-o-m to 0.6% m-o-m. As a result, over Q1 as a whole, production increased by 0.2% q-o-q, better than Q4’s 2.6% [...]