Macroview

Healthy job reports open the way to rate increases

February’s US non-farm payroll figure was strong (although partly due to temporary factors and unusually mild weather), with non-farm payrolls rising 235,000, above expectations. Other data in the February employment report were also upbeat. The US unemployment rate fell back from 4.8% to 4.7% in February, slightly below the Fed median estimate for full employment […]

ECB fine tunes communication as recovery broadens

The ECB delivered a fairly balanced, albeit more optimistic message at today’s press conference, echoing upward revisions to the staff projections for 2017-18 euro area GDP growth and inflation. Crucially, however, the 2019 projection for inflation was left unchanged at 1.7%. Looking ahead, the ECB’s four inflation criteria are unlikely to be fully met before […]

Decline in expected returns for equities and bonds

  We believe that the returns that can be expected from developed-market equities over the next 10 years will be over a third lower than average of the past 46 years. Growth potential and inflation trends suggest that expected annual returns for US equities could decline to just over 5% over the next 10 years, […]

Fixed Income: looking for a place to hide

Last year credit posted stellar total returns, and the beginning of 2017 has also started well. Investors need to watch three main macroeconomic risk factors in 2017: Inflation, which will normalize; Monetary policy, which will continue to diverge; and Fiscal policy, which will remain accommodative in both the US and euro area. However, we expect […]

Early rate hike means change in our U.S. rates scenario

As we don’t expect any big negative surprise in the February employment report (to be released on Friday), the probability of a hike next week has risen sharply. We are therefore changing our forecasts for Fed rates this year. Our main scenario is now that the Fed will first hike in March, instead of June. […]

Fundamentals look supportive for consumer sector

Macroeconomic trends in the US and Europe, in particular Trump’s policy plans, could be highly significant for the Consumer sector this year. The outlook for consumer spending is favourable and, in the US, plans for cuts in personal income tax and corporate tax could strongly benefit Consumer. Implications of possible protectionist moves are more mixed. […]

Upbeat Chinese PMI point to strong momentum

China’s official manufacturing purchasing managers’ index (PMI) in February came in at 51.6, compared with 51.3 in January, while the Caixin (Markit) manufacturing PMI rose by 0.7 from the previous month to 51.7. The official non-manufacturing PMI in February remained an elevated 54.2, only slightly below the reading of 54.6 in January. In summary, China’s February […]

Switzerland: modest recovery remains on track

The Swiss statistical agency (SECO)’s quarterly estimates show a provisional GDP growth rate of 1.3% in 2016 compared with 0.8% in 2015. Two aspects of today’s report are worth mentioning. First, on the expenditure side, both domestic demand components and foreign trade helped to boost Swiss growth in 2016. It was a much better year […]

ECB preview: less reason to be dovish, but inflation battle not yet over

The latest economic developments are consistent with the ECB turning somewhat more hawkish – or, more accurately, less dovish. Business surveys have improved, pointing to annualised GDP growth of around 2% in Q1. Headline inflation returned to the ECB’s 2% target in February, for the first time in four years. The euro area composite PMI […]

Trump’s fiscal stimulus package may well be delayed

In his first speech to Congress yesterday, President Trump sounded more presidential but was short of specifics on many of his main policy proposals. He once again complained that US companies are facing higher barriers than their foreign counterparts, but didn’t elaborate on how specifically he intended to remedy this situation. Most notably, there was […]

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