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House View, February 2019

Asset Allocation With expectations for earnings growth continuing to be ratcheted down, the recent rebound in equities owes a lot to the decline in valuations. We therefore remain neutral on equities overall. However, we believe central banks will be inclined to support financial markets this year and help ensure modest gains for risk assets. More […]

Review of the Federal Reserve’s January meeting

Dovishness was on full display at the Fed meeting on 30 January. The Fed removed its rate tightening bias, and emphasised its “patience” until the next rate move. Chairman Powell seemed particularly anxious about the global growth backdrop and explained the more dovish stance is just “common sense risk management”. Another key focus was the […]

Exports save the day for French GDP growth

French GDP rose by 0.3% quarter-on-quarter (q-o-q) in Q4, the same pace as in Q3. The details reveal that Q4 exports surged significantly, while household consumption and investment slowed. This left growth for the year at +1.5%, following +2.3% in 2017. The breakdown of GDP data shows that household consumption growth decelerated significantly, to 0.0% […]

Brexit update – UK Parliament spins its wheels

A series of votes in the British parliament resulted in little new progress on the Brexit front; the outcome being that Theresa May will return to Brussels to attempt to improve her ‘deal’, which a new parliamentary vote scheduled for mid-February. However, Brussels has rejected the idea of reopening negotiations and it is not clear […]

Cycling in the city

While it is an oft-repeated truism that biking is as good for your health as for the environment, only a very small proportion of the population has embraced a two-wheel lifestyle. In the EU for example, on average just 12% of people cycle every day, while 50% go by car and 16% use public transport. […]

Weekly View – Temporary open ahead of a crucial week

President Trump put a temporary end to the shutdown on Friday after signing a funding package that reopens the US government for business until 15 February. Federal workers will receive their back pay, but the president continues to hold firm on his demand for funding for a border wall, threatening to resume the shutdown if […]

“The Three Amigos”

After a difficult year for markets in 2018, with very few asset classes posting positive returns, we anticipate that 2019 will be a year when the “three amigos”— consisting of a bear, a bull and a kangaroo—stake out their territory in financial markets. In other words, we expect plenty of ups and downs—but also think […]

Update on euro area economic activity

The big question about the euro area economy is when the bottom of the slowdown will be reached. A rebound was already expected in Q4 2018, but at the start of this year there are still few signs of recovery. Flash composite PMI numbers for the region declined by 0.4 points to 50.7 in January, […]

US macro and Federal reserve forecast update

We are reducing our 2019 US growth forecast to 2.2%, from 2.4% previously, mostly to account for the partial government shutdown. New York Fed president John Williams has stated that the impact of the shutdown could reach 1% of Q1 GDP. Despite the lower forecast, we remain confident about the underlying fundamentals of the US […]

Emerging market fixed income outlook

Overall, we think there are reasons for investors to be more optimistic on emerging market (EM) debt in 2019. A Fed pause, a limited rise in US Treasury yields, a weaker US dollar and an eventual US-China trade truce could all be tailwinds for EM debt after poor returns in 2018. Furthermore, monetary and fiscal […]

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