Calculating expected returns for asset classes forms one of the cornerstones of asset allocation. Having a lengthy investment time-horizon makes it feasible to allow for an eventual innovation shock leading to a paradigm shift in economic regime. We have based our models on a 10-year investment time-frame. For each asset class, we have put forward two projections for annual average returns, the difference being whether […]
In late January, several emerging markets were buffeted by tremors. On forex markets, the hardest hit currencies did manage to steady themselves thanks to interventions from central banks, such as in Turkey or India.
The world’s largest economy is on the verge of embarking on a new phase. Since the sub-prime crisis of 2008, American households have been busy deleveraging. That cycle today is on the cusp of shifting into reverse. Moreover, the Fed is also preparing to negotiate a sea-change in its monetary policy with the forthcoming move […]
Although self-sustaining economic growth is gradually taking hold in the US, the Federal Reserve decided to bide its time before instigating its move to rein in its buying of assets so as not to endanger the upswing underway. Nonetheless, at the time of writing, the brinkmanship by politicians on Capitol Hill over setting the 2014 budget and raising the Federal […]
Equities Reality check for the markets Aversion to risk rose in response to comments made by the Fed, triggering a steep drop in share prices. Between mid-November 2012 and 22 May 2013, US and European equities had made impressive advances (+23.3% and +18.2%, respectively) before suffering a correction. The declines were made even steeper by […]
Real GDP growth slowed to 7.5% year on year in the second quarter 2013 from 7.7% in the first quarter and 7.9.% in fourth quarter 2012. Activity indicators demonstrate the pace of economy is weakening but there is no evidence of a hard economic landing on the back of stable domestic demand growth. Domestic demand […]
The interbank liquidity crisis that flared up in China stemmed from soaring credit in the country, bearing testament to the imbalances that typify the state of an economy at a cross-roads. Moving forward, we expect a more noticeable slowdown in economic growth and increased vulnerability in the financial system. Tensions that mounted on the Chinese interbank market in […]
Recent spectacular spikes in China’s short-term interest rate markets resulted from a combination of specific events but can also viewed as a consequence of the massive surge in leverage in the economy. What happened on the interbank market ? From about 4%, the 7-day interbank repo rate rose to 8% on 12 June and then to 12% […]
Europe is stuck in its longest recession since the end of World War II, and inflation rates are disconcertingly trending downwards. Our scenario for economic growth to quicken in the US in the second half of this year stands in stark contrast to what is happening in Europe. A whole raft of economic reforms are necessary in China in order […]
However, we should not dramatize the situation: we have seen with previous episodes of the PMI falling below 50 that GDP growth was accelerating at the same time. Disappointing economic momentum is not only due to the impact of tightening measures (anti-corruption, property). Consumption has moderated on the back of slower wage growth. Despite the […]
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