House View, January 2018

Asset Allocation Economic and earnings growth continue to offer good momentum and the possibility of upside surprises for 2018, so we remain overweight developed market (DM) equities. However, uncertainties over other key aspects of the outlook mean that investors may be unwise to lower their defences. We are keeping tail risk mitigation in portfolios. Emerging […]

A crucial start to the year for Catalonia

Following the December regional elections, in which pro-independence parties won a majority of parliamentary seats, the main challenge in Catalonia will be the formation of a new coalition government. Catalan parties have until end March/early April to reach an agreement on the next regional president, failing which repeat elections may need to be called. This […]

China: FX reserves rise again

According to the Chinese State Administration of Foreign Exchange, China’s FX reserves amounted to USD3.14 trillion at end-December 2017, up USD20.7 billion from the previous month. This marks the 11th consecutive monthly increase in Chinese FX reserves since February 2017. In full-year 2017, Chinese FX reserves increased by USD129.4 billion, in contrast with a drop […]

Switzerland: Inflation at a seven-year high

According to the Swiss Federal Statistical Office (FSO), consumer prices in Switzerland remained broadly stable at 0.8% year on year (y-o-y) in December, in line with consensus expectations. Core inflation (headline CPI excluding food, beverages, tobacco, seasonal products, energy and fuels) increased slightly to 0.7% y-o-y in December. In all, average annual inflation reached 0.5% […]

The BoJ is sticking to monetary easing

After its Monetary Policy Meeting of December 21, the Bank of Japan (BoJ) announced its intention to keep its current monetary easing programme intact. The BoJ will continue with its “Quantitative and Qualitative Monetary Easing with Yield Curve Control”, aiming to achieve and overshoot the core inflation target of 2%. The reason for the BoJ […]

Global macro: 10 surprises for 2018

In the US, we include first a ‘Texas boom’ due to rising oil prices. US oil investment could see a major uptick and Texas could accelerate, in turn lifting US growth. Secondly, we include a hawkish shift at the Fed. While Trump has preferred continuity in the Fed’s leadership with his nominee as Fed Chair, […]

Chinese demand leads the Swiss watch industry’s recovery

After years of impressive growth, the Swiss watch industry faced difficult conditions in 2015 and 2016, when exports declined by 3.2% and 9.9% respectively in value terms. The last time that there were two consecutive years of decline was in 1995-96. The appreciation of the Swiss franc, the collapse of the top market in Hong […]

2018 ECB outlook – Mission: possible

Our first choice as the title for our 2018 ECB outlook was “The courage not to act”, but regular readers will know that we used this homage to Ben Bernanke earlier this year. Yet our faith in the ECB’s courage knows no bounds and this still feels relevant today, with the caveat that the ECB […]

US to overtake Switzerland in WEF competitiveness survey?

The US is about to enact significant corporate tax cuts, that will see the federal statutory corporate tax rate drop to 21%, from 35%, starting in January (see our latest note ‘US tax cuts update – 19 December 2017’). This will significantly increase the global competitiveness of the US economy, especially as high statutory tax […]

The US tax bill will boost 2018 earnings forecasts

Last night, the US Senate approved the tax bill. It has since returned to the House of Representatives for administrative reasons, but, in line with an earlier vote, a green light looks now highly likely. Shortly thereafter, President Trump should sign it formally into law. If the tax reform is adopted, the statutory tax rate […]

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