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House View, May 2019

Asset Allocation There were no changes to our asset allocation in April. While we are encouraged by better-than-expected Q1 earnings and some improvement in earnings expectations, we remain neutral on global equities as we await new catalysts to justify current valuations. At the same time, we have a positive view of Chinese and Indian equities. […]

Fed meeting preview: Play it again Sam

The Fed meeting concluding on 1 May should provide only limited new information. The domestic growth backdrop is good and equity markets are buoyant, but low core inflation and the proximity of the theoretical ‘neutral rate’ will likely stifle the Fed’s temptations to raise rates. Instead, the Fed should signal it is happy to stay […]

Is Europe turning Japanese?

The European Central Bank (ECB) surprised market watchers with its dovish turn in January, wiping out any prospect of an interest rate rise this year and revising its growth projections for the euro area downward for 2019. With Europeans set to live with interest rates at zero (or negative) for longer, many are wondering if […]

Peripheral bonds after the Spanish election

On April 28, Spain held its third general election in less than four years. As was expected, the centre-left Socialists (PSOE) emerged the largest party, but it does not have an absolute majority, so negotiations with other parties will be needed. But the political fog in Spain is unlikely to lift much before the regional and […]

Weekly View – A Socialist victory

Spain’s governing Socialist party swept to victory at the weekend’s general elections, which enjoyed the highest turnout since 2008, with a 75% participation rate. Taking 29% of the vote however, the Socialist PSOE party is far short of an absolute majority and will need to form a coalition, which will likely be fragmented and unstable […]

Euro area Q1 GDP growth could be stronger than expected

Next week will be a busy one for Europe, with lots of data releases: European Commission business survey (April); advance GDP (Q1); M3 money supply (March); HICP flash estimate of inflation (April); and final manufacturing purchasing manager indices (PMIs, April). The advance Q1 GDP will be especially closely watched. No euro area GDP breakdown will […]

Weekly View – Europe’s “black hole”

Positive economic data has sent relief through markets, with encouraging news coming out of the world’s two biggest economies. The Chinese economy grew faster than expected in the first quarter, as the government’s stimulus policy begins to take effect. In the US, a rebound in consumer spending resulted in retails sales posting their biggest gain […]

China: Q1 growth beats expectations

The National Bureau of Statistics of China published Q1 GDP figures along with some key economic indicators for March. While we had previously flagged the upside risk to our earlier GDP forecast following the rebound in PMIs and strong credit numbers, the latest data releases still surprised to the upside. In light of the strong Q1 results and […]

Business cycle could define Trump’s re-election chances

As we move closer to the 2020 presidential election, Donald Trump has been blatantly leaning on the Federal Reserve to be more accommodative and has been trying to appoint nominees to the Fed board who share his preference for loose monetary policy. The countdown to the 2020 elections also seems to be prompting Trump to […]

Swiss policy mix review

The Swiss federal budget is governed by a strict expenditure rule, which is enshrined in the Constitution. Since its introduction, the ratio of public debt-to-GDP has been significantly reduced, falling back to its early-90s level. At the close of 2018, the Swiss federal budget registered a significant surplus of CHF 2.9 billion, compared with budget […]

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