Shares and bonds of companies producing and refining oil have come under the cosh. Spreads on corporate bonds issued by groups in these sectors have been stretching wider, as have spreads on sovereign debt from oil- producing nations like Russia or Brazil. Asset classes reacting in contrasting ways The slump in the price of crude […]
The global economy is becoming increasingly desynchronised. A shift in macroeconomic regime has materialised in the US, with the business and economic cycle taking over as driver from monetary policy. In Europe, pressure is mounting on the European Central Bank (ECB) to unfurl a programme of quantitative easing (QE) at a time when tumbling oil […]
Against the backdrop of US and European economic cycles drifting ever further apart, monetary policies being pursued by the European Central Bank (ECB) and the US Federal Reserve have also been following quite different paths. In a drive to stimulate growth and counter deflationary risks, ECB President Mario Draghi is indeed moving from words to […]
In August, euro area headline inflation moved further away from the ECB target, recording its 90th consecutive month below 2%. Meanwhile, monetary aggregates and surveys on activity painted a weak picture, suggesting a fragile recovery after a disappointing H1. Thus, these developments show that deflationary forces are still at play in the euro area. A […]
Euro area GDP growth came in on a weak note again, failing to beat consensus expectations and thus reinforcing the view that the euro area economy remains fragile and subdued. Disappointing growth figures Eurostat’s preliminary estimate showed that euro area real GDP growth remained flat in Q2 (0.0% q-o-q, 0.2% q-o-q annualised), coming in lower […]
After two months of decline, the PMI composite increased in July, supported by the solid performance of the services sector. July’s figure is above the Q2 average, suggesting that euro area activity gained some momentum at the start of Q3. In terms of countries, the divergence between German and French manufacturing sectors has widened further. […]
Last year when we compiled our scenario for the economy and financial markets for the year ahead in 2014, we had mooted two possible outcomes for equities in the developed world. Since the start of 2014, share prices on developed-nation markets have outpaced the forecast growth in current-year company profits. Adventurous scenario coming to pass for […]
The US Federal Reserve’s exit strategy by tapering its quantitative easing is part and parcel of the process of normalisation that the growth and inflation regimes of the world’s premier economy are undergoing. In contrast, the European Central Bank (ECB) may well have to push through more measures yet to counter the risk posed by […]
Since the ECB’s last Governing Council (GC) press conference, the expectations regarding the measures to be announced on 5 June have steadily increased. On top of the unusual firm pre-commitment shown at the time, economic news since then has tended to confirm the picture of a fragile recovery, too-low inflation and depressed monetary dynamics, an […]
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 […]
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