Since the Global Financial Crisis, globalisation appears to have slowed. Indeed, despite the enormous benefits experienced in the post-WWII era, international trade and financial flows may have gone into reverse (Chart above). In addition, following disruptions caused by the Covid pandemic, some manufacturers have shifted supply chains to domestic producers, or at least alternatives closer [...]
Japan: Now For the Hard Part
In the past week, two important things happened in Japan. First of all, the Nikkei stock market index hit an all-time high; finally, eclipsing the previous record established 35 years ago. Following decades of underperformance, Japanese equities have left US stocks in the dust during the past two years. Meanwhile, the Bank of Japan (BOJ) [...]
China: 2024 Forecast Is Unachieveable
In a blog six years ago, I suggested China's growth slowdown had just begun. I indicated the headwinds emanating from the property crisis, shrinking population, weak productivity growth, debt deleveraging, and the rebalancing towards consumer-led activity would slow China's long-term GDP growth potential towards 3.5% to 4%. In the interim, most investors and pundits have [...]
Can Europe Surprise? Only With Reforms
Is Europe in secular decline? If so, can it be halted? Since as recently as 1990, the region's share of global GDP has declined from 24% to 14%. Even compared to other advanced economies, Europe has lost ground. Indeed, since 2005 European GDP growth has trailed the USA by 0.7% annually (the gap is less [...]
Emerging Markets: Has the Time Come?
28 January 2024 At last year's BRICS Summit in South Africa, national leaders were all smiles; ushering in what they believe will be a more influential era for the Global South. Emerging market investors, on the other hand, have had little to celebrate, as EM markets have dramatically underperformed during the past 15 years -- [...]
Powell Pivot: What Could Go Wrong or Right?
14 January 2024 On December 13, just weeks after warning it was premature to think the Federal Reserve would begin lowering interest rates, the US central bank gave the green light to at least three cuts in 2024. To be sure, consistent communication has never been a strong point of Chairman Jerome Powell's premiership. Nonetheless, [...]
Strategy 2024: Searching for a Soft Landing
13 December 2023 Happy Holidays! Another challenging year is coming to a close. Yes, the US (and global) economy defied expectations of recession. True, the S&P 500 has recorded a 20% gain. However, the rally was narrow: only technology outperformed the market. Indeed, of the 8 market sub-sectors, only tech, industrials, and financials posted positive [...]
Italy: Supply-Side Reforms Are the Only Remedy
19 November 2022 I have just enjoyed a fact-finding trip to the Emilia-Romagna region of Italy. Naturally, I indulged myself with the gastronomic delights of Bologna, Parma, and Modena; as well as marvelled at the mosaics in Ravenna. On the economic front, to be sure, Italy has had little to cheer about in recent years. [...]
Germany: Curing Europe’s Sick Man?
15 October 2023 Once admired as Europe's growth engine, Germany is now being identified as the region's "sick economy". Indeed, Germany's post-Covid recovery has lagged far behind the world's other advanced countries (Chart below). And, the nation's underperformance pre-dates the pandemic. What lies behind Germany's growth malaise, and can Europe's "Sick Man" be cured? To [...]
Africa: Addressing Challenges Old and New
31 August 2023 In a recent blog, I outlined the risk of near-term liquidity problems in certain African nations. And, while I suggested a region-wide debt crisis can be averted, it's important to put the issue in a broader context. In particular, as a result of the rise in regional debt levels (both domestic and [...]
Africa: Debt Crisis Looming?
7 August 2023 Africa has underperformed economically for a long time. Per capita GDP has risen less than 1% annually during the past 30 years (chart below); lagging all other emerging market regions during this period (although Latam has also slowed in the past decade). During this interval, meanwhile, output per person in the advanced [...]
Spain: Convergence — Finishing the Job!
30 June 2023 I love Spain: the food, wine, sun, landscape, art, architecture, and the unmistakable roar of happy people cascading into the streeets from busy bodegas! Indeed, I just returned from trendy Valencia where the post-Covid atmosphere is bouyant. The 1992 Maastricht treaty -- outlining a path towards the introduction of the Euro in [...]
Asia: Will Global Growth Engine Outperform?
28 May 2023 The IMF's recently released global forecast highlights that Asia will be the only region to experience stronger economic growth this year relative to 2022. Likewise, the Asian economy will outperform all other regions both this year and in 2024 (Chart above). Indeed, the following Chart indicates that Asia will account for over [...]
Russia: Recession May Continue into 2024
2 May 2023 Yes, I concede the Russian economy proved to be more resilient than I expected in 2022. Indeed, Russia's GDP contracted only 2.1% last year compared to my projection that the imposition of sanctions would result in a slump of at least 7%. Of course, one must question the current reliability of Russia's [...]
Ireland: Irish Eyes Are Smiling
27 March 2023 Still basking in the glow of another Saint Patrick's Day celebration, Ireland was crowned the Six Nations rugby champions. As the world's top-ranked team, the nation eagerly anticipates this autumn's World Cup in France. Sure, Irish eyes are smiling indeed! But, that not all Ireland has to celebrate these days. Despite current [...]
Europe: Ukraine Invasion — A Year On
24 February 2023 The end of China's lockdown, signs global inflation is peaking, and the slower pace of US interest rate hikes have led investors to embrace the prospect of an economic "soft landing". Financial market optimism has been particularly evident in Europe. Indeed, collapsing natural gas prices have led to a 10% rally in [...]
Soft Landing: What Could Go Wrong?
5 February 2023 After a bruising 2022, global financial markets now have fully embraced the propect of a "soft landing" for the global economy. Even the IMF has revised up its 2023 GDP growth forecast following China's post-Covid opening, declining European natural gas prices, and signs that world-wide inflation may have peaked. In the United [...]
China: Population Decline = Growth Headwind
22 January 2023 In addition, China's shrinking population will continue to shape both the nation's long-term economic strategy, and the government's short-term policy focus. In particular, with inflation low, monetary and fiscal policy will need to remain stimulative. However, government spending priorities will need to be altered dramatically. This shift will not only support China's [...]
Brazil: Lula II — Firebrand or Pragmatist?
2 November 2022 Indeed, Brazil's election result was historic. Not only was former President Lula da Silva returned to power (by an unexpectedly narrow margin), but Jair Bolsonaro's defeat was the first by an incumbent since the country returned to democracy. Despite earlier threats to challenge the election outcome, President Bolsonaro and his supporters appear [...]
China: 2023 May Be Even Tougher than 2022
28 October 2022 At China's recently concluded 20th Communist Party Congress, Xi Jinping was re-elected to an unprecedented third term as Party leader. Xi now appears set to lead both the Party and government for the next five years, and likely even longer. With political power now secured, can the same be said about the [...]
India: Geopolitics, Climate, and Growth Risks
31 May 2022 In my March 2019 blog entitled "India: Long Growth Runway Still Lies Ahead", I suggested India may enjoy faster economic growth than all other large economies during the next decade, including China. The following Chart indicates the IMF now shares this appraisal, as India's long-term potential GDP exceeds all other countries (except [...]
European Markets: Intact or In Tatters?
12 May 2022 In my 2022 Strategy blog entitled "Avoiding Stagflation?" (published 1 December 2021), I suggested global financial market volatility was poised to rise, and equity and bond returns would be negative. On a relative basis, however, I made the case for an outperformance of European markets. Much has happened during the past six [...]
USA: Too Hot, Too Cold, or Just Right?
At the 16 March FOMC meeting, US Federal Reserve Chairman Jerome Powell emphasised the central bank's determination to lower inflation towards the 2% target. To this end, the FOMC raised the Federal Funds rate by 25bp, and Chairman Powell indicated similar rate hikes should be expected at future meetings. Further, he warned the FOMC was [...]
China-Russia Friendship: How “Eternal” Is It?
15 March 2022 Recent history is full of seminal events. The two World Wars and America's emergence as a global power, the Russian Revolution, the OPEC oil embargos, Mikhail Gorbachev's reforms (perestroika, glasnot, and detente), the collapse of the Soviet Union (and the end of the Cold War), and Deng Xiaoping's "Opening Up" modernisation all [...]
Ukraine: Global Implications
1 March 2022 The military situation on the ground following Russia's unprovoked invasion of Ukraine remains fluid, and many outcomes are still feasible (including a few catastophic scenarios). In order to begin assessing the economic fallout of the invasion, I must make some assumptions. Even now, what seems apparent is Russian President Putin has made [...]
China: Tiger Needs a Red Packet
6 February 2022 During the past two Covid-strickened years, China's economic growth has outperformed global activity. Indeed, while output in developed nations contracted nearly 5% in 2020, the Chinese economy actually gained 2%. Likewise, China's 8% recovery in 2021 outpaced the 5% rebound in the world's richer countries. Behind the headlines, however, the news has [...]
Fed to Tighten Till Markets Pushback
18 January 2022 In December, the US Federal Reserve abandoned its belief that rising inflation was "transitory", and signaled that monetary tightening may commence earlier that expected. In their defense, the extreme imbalances in aggregate supply and demand in both labour and goods markets (e.g. supply chain disruptions) during the 2020/21 economic recovery have complicated [...]
Strategy 2022: Avoiding Stagflation?
1 December 2021 As investors establish their 2022 market strategy, I summarise my answers to many key questions: Will the current rise in inflation be temporary or are rapidly rising prices here to stay? In the USA, for example, I expect price growth to peak in the first quarter of 2022, and "core" inflation to [...]
EM Inflation: Is the Scare Temporary?
25 June 2021 Despite US Federal Reserve Chairman Powell's attempts to reassure investors, financial markets are concerned about inflation. Likewise, price growth has accelerated in key emerging market countries. In response, central banks in Brazil, Russia, Mexico, and Turkey have already begun to tighten monetary conditions. Is Emerging Market inflation temporary? That is, does it [...]
Mid-2021 Review: Inflation, Scarring & Tapering
6 June 2021 Typically, investors must juggle numerous factors while making their global asset allocation decisions. In this regard, the next 12-18 months may be more straightforward. By now, no one doubts massive monetary and fiscal stimulus will produce a sharp, V-shaped 6% global recovery in 2021, with China and the USA leading the way [...]
Bitcoin: What it Is, and What It’s Not!
20 May 2021 In the next few weeks, I will consider the future of money. In particular, I will evaluate the evolution of Central Bank Digital Currencies (CBDC), as well as the potential role crypto-currencies may play in the future monetary system. Today, let's deal with the elephant in the room: Bitcoin! The world's largest [...]
Latin America: Building on Climate Advantages
14 May 2021 Latin America accounts annually for only 5% of global carbon dioxide emissions. And, Mexico and Brazil alone are responsible for over 50% of the region's pollution. Moreover, while Latam's GHGs have risen 25% since 2005, emissions in many key countries have been declining since 2014. Likewise, CO2 per capita levels are comparatively [...]
Asia: Urgent Climate Action to Prevent Inequality
2 May 2021 Asia has a vital role to play in mitigating the global risks of climate change. Indeed, the region accounts for over 50% of world-wide CO2 emissions (and 44% of energy consumption). Of course, China and India are the world's #1 and #3 GHG emitters. These two giants are responsible for 70% of [...]
Russia: Not Rushin’ to Buy!
15 April 2021 The Russian ruble (RUB) -- traditionally a petro-currency -- has not benefited from the recent rise in oil prices. Indeed, during the recent bout of Emerging Market currency volatility -- provoked by a combination of rising US bond yields and problems in Turkey -- the Russian central bank (CBR) raised interest rates [...]
Biden’s Climate Plan: Yes We Can, We Must!
8 April 2021 In the climate model I unveiled last year, I rated 90 countries' vulnerability to climate change. The United States ranked a disappointing #20 (my blog "Climate Change: Who's Preparing, Who's Not" can found be on my website). President Biden intends to change that. Indeed, spending to mitigate the impact of rising global [...]
Turkey: Systemic Risk or Just One Bad Apple?
26 March 2021 President Erdogan's decision to sack Turkey's central bank governor Naci Agbal last week following the CBRT's decision to raise interest rates 200bp has increased volatility in EM currency markets. Is this just the latest episode of Turkish political intrigue? Alternatively, given both Brazil and Russia also lifted key rates, has a more [...]
Global Fiscal Policy: Keep the Pedal to the Metal
16 March 2021 In the past week, the Biden Adminstration passed its historic American Rescue Plan (ARP) and UK Chancellor Rishi Sunak unveiled his budgetary program for the coming years. The message from both is clear, the immediate priority is to provide Covid-related relief to household and businesses. Concerns about rising public sector debt would [...]
Global Money: Will Boom Go Bust?
7 March 2021 We have all marvelled at the dramatic expansion of the US Federal Reserve's balance sheet following both the Global Financial Crisis (GFC) and the Covid pandemic. And, the Chart illustrates quantitative easing (QE) policies have had a similar impact on the asset holdings of central banks worldwide (thanks to Yardeni Research for [...]
Will Inflation End the Party?
28 February 2021 There's a whiff of inflation in the air: commodities are soaring, bond yields are rising, and yield curves are steepening. And, while these trends actually began last Summer (and despite Federal Reserve Chairman Powell's reassuring comments in Congress), equity market volatility is increasing. In the period ahead, financial markets will confront several [...]
Brazil: Riding the Commodity Wave?
18 February 2021 Pundits are projecting the onset of the next Commodity Supercycle. To be sure, prices of primary products have spiked dramatically in the past year, and many commodity-linked currencies have begun to rally. The Brazilian Real, however, has been noticeably absent, despite the country's heavy reliance on this sector (Chart above). Unfortunately, the [...]
China: Becoming World’s Biggest Economy?
9 February 2021 China was the only major country to record economic growth in 2020, with GDP expanding 2.3%. Indeed, following three consecutive quarters of expansion, national output is already 6.5% above pre-Covid levels. As we approach Chinese New Year, the IMF optimistically projects 8.1% GDP growth during the year of the Ox. Likewise, I [...]
Biden’s Foreign Policy Reset: Market Impact
28 January 2021 Joe Biden is now the 46th President of the United States, and Anthony Blinken has been confirmed as the new Secretary of State. President Biden has promised substantive changes in American foreign policy, and initial Executive Orders indicate he will act on this pledge. To be sure, American international policy decisions are [...]
Ireland: The Brexit Victor?
13 January 2021 There are no winners in Brexit, or so they say. In the recently agreed EU-UK Free Trade Agreement (FTA), the United Kingdom was able to "regain control" of its immigration policy, to maintain tariff-free access to the EU Single Market (for now at least), to regain the ability to negotiate independent trade [...]
Brexit: Do Markets Think It’s Worth the Price?
4 January 2021 Finally, nearly 1,500 days after the Brexit referendum, the United Kingdom has both left the European Union and signed a Free Trade Agreement (FTA) outlining its future trading relationship with its largest partner. Political partisans will continue to defend their entrenched positions regarding the merits of this deal. On the one hand, [...]
Asia: Global Growth Engine in 2021
1 December 2020 As the holiday season approaches, much of the world is battling a Second Wave of the Coronavirus. To be sure, world leaders are confronting unprecendented challenges, and tough decisions are required. Throughout the pandemic, many policymakers, as well as members of the media and general public, portray the options as a choice [...]
Strategy 2021: V(accine)-Shaped Recovery?
13 November 2020 Three cheers for the world's scientific community! The recent announcement that an effective vaccine may be on the way is a very welcomed, early Christmas present at the end of a tough year. Of course, there are numerous medical questions and logistical challenges that still must be solved. But, along with everyone [...]
Covid in Latin America: Another Lost Decade?
5 November 2020 Saddled with high debt, Latin America's real per capita GDP stagnated between 1980 and 1995, despite a healthy global economic environment. A lost decade (Chart above). The region has suffered greatly during the ongoing Coronavirus crisis, and the economic consequences have been enormous. Despite having only 8% of the world's population, the [...]
Covid Second Wave: Bracing For a Long Winter
22 October 2020 The long-anticipated Covid second wave is here (third wave in the USA). Experts project, correctly I suspect, that as winter arrives and activity heads indoors, the rate of infection will accelerate significantly further. In the United States, for example, I would not be surprised if daily new cases rise from 50,000 to [...]
Europe: Will Second Wave Derail Recovery?
12 October 2020After Europe's devastasting Coronavirus outbreak in early 2020, painful measures succeeded in suppressing the spread of Covid-19 during the summer. As health experts warned, however, social lockdown is only akin to hitting the pause button; buying time to allow more sustainable mitigation to be put in place. Unfortunately, as lockdown measures were eased [...]
Biden: Build Back Better or Going Bust?
18 September 2020 Presidential candidate Joe Biden's economic program is taking shape. His plan to "Build Back Better" following the pandemic will involve higher levels of government spending and taxation. My intention is not to project the numerical impact on the nation's public finances, as this is ably accomplished by Penn Wharton, the Committee for [...]
Trump’s Economy: The Best Ever!?
10 September 2020 With Labour Day celebrations marking the unofficial end of summer, the US electoral race now will enter its final (and likely most brutal) phase. We do not need President Clinton's 1992 campaign strategist James Carville, who famously coined the phrase "it's the economy, stupid", to remind us of the role the economy [...]
Climate Change and the 2020 Election
31 August 2020 The Republican and Democratic conventions are over, and the US election campaign will shift into high gear. Surely, climate change will be one of the most important topics for the US electorate to consider. Democratic candidate Joe Biden wants America to become net-carbon neutral by 2050, and to eliminate the use of [...]
Climate Change: Who’s Preparing, Who’s Not
28 June 2020 The expansion of ESG investing indicates that some fund managers are beginning to give additional attention to environmental, social and governance factors in the selection of company investments. Furthermore, they are using their financial clout to encourage corporate decision-makers to prioritise climate change in their business strategies. Unfortunately, however, ESG remains a [...]
Climate Change: An Investor Tool Box
14 June 2020 The Covid pandemic, understandably, has replaced the climate debate in the headlines. However, the impact of rising global temperatures will be the most important macro-issue facing investors in coming decades. Reflecting the topic's importance, ESG investing (emphasising environmental, social, and governance factors) has expanded significantly in recent years. Sadly, the ESG sector [...]
Climate Change: Bringing Power to the People
3 June 2020 In my last blog Post-Covid: Crucial Decade for Climate Change, I suggested that in the post-Covid period, Climate Change would reassert itself as the most important macro-issue. And, if the world is to have any chance of attaining the objectives of the Paris Climate Accord, dramatic reductions in the level of carbon [...]
Post Covid: Crucial Decade for Climate Change
26 May 2020 The climate debate has fallen from the headlines: collateral damage of the Coronavirus outbreak. The focus on the Covid-19 pandemic, of course, is understandable. However, the need for urgent action aimed at achieving the carbon dioxide emmission reduction goals established in Paris in 2015 has not gone away. Indeed, there lessons from [...]
Covid Strategy: Mind the Gap!
10 May 2020 Every day one hears the grim news regarding the global economic outlook. Nevertheless, financial markets continue to rebound relentlessly. What's up? The markets are working through various phases in coming to grips with the Covid-19 emergency. In the first phase, investors panicked as the Coronavirus spread world-wide, lockdowns were intensified, and fears [...]
Emerging Markets: Bracing for More Bad News?
17 April 2020 We have all seen the evidence that investors have deserted Emerging Markets in the wake of the Covid-19 pandemic. Indeed, the following Chart illustrates the liquidation of EM assets has been considerably larger than in past episodes, including the Global Financial Crisis (GFC). As a result, the following Chart illustrates that EM [...]
Covid-19 Strategy: Sifting Through the Rubble
1 April 2020 The investor in the photgraph above can almost be forgiven for putting his head in his hands -- a lapse of proper hygiene. The first quater of 2020 tested the nerve of even the most hardened market professionals. Following the recent equity market bounce, the commencement of Q2 2020 and the US [...]
Global Fiscal Policy: Whatever It Takes
25 March 2020 In recent weeks, policymakers world-wide have repeatedly pledged "to do whatever it takes" to offset the economic damage wreaked by the Covid-19 outbreak. In general, the aim has been to provide needed medical resources, allocate compensation for sick leave, provide direct payments to workers losing their jobs, and to give support to [...]
Covid-19: Don’t Suffer a Lack of Imagination
20 March 2020 Initial data from China indicate the economic impact of the Coronavirus and efforts to prevent its spread will be significant. I will make some preliminary global economic projections, although they come with a greater degree of uncertainty than normal. Perhaps more importantly, I will set out some guideposts about how to assess [...]
Covid-19: Central Banks Fail to Bring Comfort
16 March 2020 Global central banks have announced additional emergency stimulus measures. In particular, the US Federal Reserve reduced its policy rate by 100 basis point, which now stands near zero. In addition, the Fed will resume aggressively its quantitative easing program. During the Global Financial Crisis global markets were reassured by such assertive policy [...]
Covid-19: Korea – A Bit of Good News?
15 March 2020 The news on the Coronavirus continues to be alarming. However, perhaps Korea's experience is beginning to offer a glimmer of hope. Worldometer provides data indicating that the new case count has slowed sharply during the past two weeks (Chart above). To be sure, the number of infected people has not peaked, nor [...]
Covid-19: Temporary Maybe, But Painful Shock
13 March 2020 The Covid-19 pandemic appears to be moving into a new phase. While the response differs between countries, most governments are transitioning from the contaiment phase towards focusing efforts on delaying the spread of the disease. This strategy hopes to lower the peak number of infections. The plan seeks to buy time; thereby, [...]
Covid-19: US Lags on Testing
12 March 2020 The US imposed a travel ban with Europe. The UK is transitioning from the from the containment to delay phase of dealing with the spread of the Coronavirus. However, major differences exist in the level of testing between countries. And, there's a strong correlation between testing and discovery of infected cases. If [...]
UK Immigration: Dispelling the Myths
21 February 2020 Concerns about the impact of immigration on jobs, wages, public services, and national identity played a huge role in the United Kingdom's decision to leave the European Union. Unschackled by the EU's freedom of labour movement requirement, Prime Minister Boris Johnson's government unveiled its long-awaited immigration proposal. In practical terms, the new [...]
India: Has Something Gone Wrong?
11 February 2020 Since the election in May, India's GDP growth has decelerated sharply: advancing only 4.5% in Q3 2019 compared to 7.3% in 2018. Does this sharp slowdown in economic activity simply reflect short-term volatility or is something more ominous going on? Identifying the sources of the current weakness will help answer this question. [...]
Swiss Franc: Currency Manipulator or Safe Haven?
30 January 2020 In its recently released report on foreign exchange markets, the US Treasury added Switzerland to its watchlist of currency manipulators. To be sure, the Swiss franc does meet some of the criteria. Indeed, Switzerland's current account surplus is a staggering 10% of GDP, and its bilateral trade surplus with the USA has [...]
Sino-US Trade: First Step on a Long Journey
20 January 2020 A comprehensive trade agreement between the United States and China was never a realistic possibility: these take years of skillful negotiations to conclude. To be sure, the recently-signed plan has many shortcomings. Predictably, the deal fails to address many of the most contentious issues, e.g. state subsidies and cyber-security. Likewise, the dispute [...]
China: Trade Deal Won’t End Slowdown
12 January 2020 The prospect that this week the USA and China will sign Phase 1 of a trade deal has buoyed financial markets. Of course, I will assess the impact of the agreement as details emerge. However, initial optimism is warranted if the plan represents the first step towards a comprehensive trade agreement (even [...]
Global Strategy Podcast: 2020 Vision
For enthusiasts of multi-media platforms, please enjoy this podcast on Global Strategy: 2020 Vision. I encourage you to read the blog of the same name found on my website. Also, look at individual reports on several of the key issues outlined on the podcast. These can be found by clicking the Archive or Regional tabs [...]
Global Strategy: 2020 Vision
11 November 2019 Easy monetary conditions have fueled the global equity index to an all-time high. Looking forward, key market risks centre on the likelihood of a 2020 global recession, the possibilty of a trade deal between the United States and China, and political risks, especially as US and UK voters go to the polls. [...]
Asia: Bending, But Not Breaking
22 October 2019 The global economy is slowing. During previous bouts of world-wide economic weakness, Asia has been relied upon as an engine of growth. This time, however, Asian economic activity is also cooling, as the region (and individual countries within the area) confronts both external and domestic challenges. The deepening trade war, of course, [...]
UK Sterling: Pounded! What’s Next?
11 October 2019 Understandably, perhaps, Brexit fatigue is widespread. However, the issues at stake are far too important to allow the outcome to be decided simply because of weariness. Not only are the economic implications significant, but the result will define the relationship between the UK executive government, the Parliament, the courts, and the electorate [...]
Europe: Fiscal Stimulus Key to Avoid Recession
29 September 2019 The European economy has been decelerating since 2017. Indeed, the meagre 0.2% gain in GDP during Q2 2019 suggests economic activity may be stalling. And, as Germany, Italy, and the UK all recorded negative growth rates during the interval (and with Q3 looking decidedly weak as well), financial markets are increasingly concerned [...]
Globalisation: Linking Immigration and Education
5 September 2019 Concerns about the impact of immigration was a major factor in the United Kingdom's Brexit decision. Likewise, the issue will surely feature in upcoming US Presidential campaigns. To be sure, it is an emotive topic: raising issues of cultural identity, public finances, and the impact on local labour markets. The large-scale international [...]
Currency Wars Ahead?
6 August 2019 The US Federal Reserve's recent decision to reduce interest rates a stingy 25bp, and to deliver a less-dovish-than-expected statement raises more questions than it answered. Was the rate cut a one-time adjustment to provide insurance against the prospect of weaker growth ahead? Did Chairman Jerome Powell react to White House pressure? If [...]
Avoiding the Potholes Ahead
12 July 2019 Global equity markets are at (or approaching) all-time highs. What's not to like? In particular, the US market has been buoyed by the Sino-US trade truce achieved at the Tokyo G20 meeting, the prospect of Federal Reserve interest rate cuts, and solid employment gains. Indeed, our year-end 2019 S&P 500 target of [...]
Vietnam: Asia’s Rising Star?
20 June 2019 The escalating trade war between the USA and China has already taken its toll on the global economy, with the export-oriented manufacturing sector hit hardest. And, it's not just the US and China feeling the pain. The following Chart highlights the slump in exports world-wide, especially in the open Asian economies. The [...]
Trade War: Entering a New Phase?
8 June 2019 President Trump's recent decision to hike tariffs on an additional $200 billion of Chinese exports escalated the trade war. The US administration has suggested they will consider levies on a further $300 billion of US imports from its Asian partner following the June G20 meeting. It remains unclear if the imposition of [...]
China-US Trade: No Quick Fix!
23 May 2019 President Trump's decision to raise tariffs to 25% on $200 billion of Chinese imports, and his suggestion an additional $300 billion of purchases could soon be subjected to similar levies has brought the trade conflict to a new level. China is certain to retaliate. Understandably , the escalation of the trade war [...]
Japanification: Has Europe Been Infected?
2 May 2019 The sharp decline in equity markets during Q4 2018, reflected the likelihood that global economic activity would decelerate in 2019. Some commentators went even further, coining a new phrase, and posing the question of whether a "Japanification" of the global economy was taking place. That is, even a decade after the Global [...]
Podcast: Kicking the Tires
17 April 2019 This podcast complements the blog of the same name, which can also be found on the website. For those of you too busy to read during the holiday weekend, I thought I would make life easy for you! Good luck! Happy Easter! Comments always are welcome!
Kick the Tires: Forecast Update
17 April 2019 In our 2019 Global Strategy blog entitled "Turning (Even More) Defensive" (published in September 2018), we outlined the broad macro themes we expected to drive financial markets. Given the sharp market swings that have occurred since last Autumn, I thought it would be worthwhile to review these themes in light of subsequent [...]
Mexico & Brazil: Populism’s First 100 Days
5 April 2019 In elections last year, voters in both Brazil and Mexico opted overwhelmingly for populist candidates. To be sure, Latin American populism takes many shapes. In Mexico, Andres Manuel Lopez Obrador's version (AMLO) promised significantly higher spending on social programs and infrastructure. Brazil's new President Jair Bolsonaro has pledged assertive efforts to clamp [...]
Global Central Banks: Taking 2019 Off!
21 March 2019 At its March meeting, the US Federal Reserve signaled it would keep interest rates unchanged in 2019. In a similar fashion, the European Central Bank (ECB) at its recent gathering signaled interest rate hikes will be delayed until next year, and additional monetary support was forthcoming. But, that's not the end of [...]
India: Long Growth Runway Still Lies Ahead
6 March 2019 Following the BJP's dramatic 2014 electoral victory, Prime Minister Narendra Modi enjoyed a mandate to implement economic reform. From the beginning, however, the program faced criticism. On the one hand, Hindu nationalist believe the changes do not go far enough in promoting their interests, whereas non-Hindus charge the benefits have not been [...]
Turkey: Boom, Bust, What Comes Next?
22 February 2019 Last year's Turkish financial market crisis emanated from the confluence of several domestic and international factors. To be sure, Turkey is no stranger to boom-bust economic cycles. And, fueled by overly expansive macroeconomic policies, the Turkish economy was overheating and inflation rising sharply by mid-2018. Against this already challenging backdrop, the Erdogan [...]
Fed Pauses: In Search of a Soft Landing
6 February 2019 During these Winter months, my breakfast typically consists of a big, steaming bowl of porridge! As in the Goldilocks fairy tale, however, getting the recipe right requires some experimentation. Often the same is true of monetary policy decision-making. In search of a soft landing for the US economy -- neither too hot, [...]
Will the Debt Bubble Burst in 2019?
23 January 2019 One of the unintended, albeit unsurprising, consequences of the current period of ultra-loose monetary conditions has been the extraordinary buildup in debt worldwide. The top Chart illustrates that during the previous business cycle global debt had remained stable at what seemed an elevated level of 80% of GDP. In the aftermath of [...]
Heading for Global Recession in 2019?
10 January 2019 Happy New Year! I am back at work for the first time since releasing my blog in mid-December. Did I miss anything??!! In a word, it's been crazy! In September, we published our 2019 Global Strategy Outlook entitled "Turning (Even More) Defensive", in which we warned that the year ahead would be [...]
No Deal Brexit: Project Fear or Simple Facts?
16 December 2018 Following the Brexit debate often reminds me of cartoon characters who, prior to proceeding to their destination, frantically spin their wheels without actually moving. Such has been the case for much of 2018. After the Parliamentary drama of the past few weeks, however, issues have become clearer and options have narrowed. In [...]
2019 Strategy: Turning (Even More) Defensive!
4 December 2018 Enjoy my 2019 Strategy Podcast. The broadcast complements and updates my September blog entitled "2019 Strategy: Turning (Even More) Defensive!" Also look at previous blogs on various country assessments and policy issues -- all found in the Archive of Recent Blogs.
Europe: Slipping Towards Recession?
25 November 2018 The European economy surged between mid-2016 and the end of last year -- expanding at an impressive 3% annual clip during this interval. This year has been quite a different story, as growth has consistently disappointed: indeed, GDP advanced a meagre 0.8% (annual rate) during the third quarter of 2018. There are [...]
Auf Wiedersehen Mon Ami(e)!
12 November 2018 Last weekend's gathering of world leaders to commemorate the centenary of the World War I armistice was also an occasion to celebrate 70 years of European peace and stability. It was also appropriate to recognise the European Union's contribution to this extended period of prosperity. However, there existed also a sense of [...]
China: Slowdown Just Beginning
25 October 2018 We all know China's economy is slowing. Indeed, markets and pundits agonise when GDP results fractionally dip below expectations, as highlighted by the spike in market volatility following the recent news Chinese output advanced "only" 6.5% during Q2 2018 (compared to the 6.6% forecast). To be sure, such results seem disappointing, as [...]
After USMCA, Taking Aim at China?
11 October 2018 After years of describing NAFTA as "the worst trade deal in history", the Trump Administration along with Canada and Mexico signed the US Mexico Canada Agreement (USMCA). The White House, naturally, hails the accord as a historic triumph for American workers and farmers. Critics view the deal as a simple rebranding of [...]
Can Bolsonaro Unite Brazil?
30 September 2018 Brazil will go to the polls next weekend in perhaps the most wide-open, consequential election in its history. I will leave it to more clever pundits to predict the outcome (especially after Brexit and the US election results!). Rather, following recent volatility in emerging markets, I will outline the challenges the next [...]
Strategy 2019: Turning (Even More) Defensive!
19 September 2018 As analysts return from summer holidays, they tend to extend their earnings forecasts into the next year. In this spirit, I am casting my strategic gaze into 2019 as well. In order to set the stage, a brief review of our 2018 strategic themes may be helpful. In our December essay "Aging [...]
EM Contagion: Who’s Next??!!
10 August 2018 In the wake of the turmoil in Turkey, markets are considering which Emerging Market currencies potentially could be vulnerable if a broader EM contagion develops. A couple of my favourite Charts may provide some clues. What has provoked the dramatic run on the Turkish lira? Chart 1 illustrates the Turkish currency was [...]
Germany: It’s Time to Act Boldly!
22 July 2018 President Trump has taken aim at Europe. In reality, however, most of his ire has been directed at Germany. The President objects to America's $66bn bilateral trade deficit (the fourth largest amongst US trading partners), as well as Germany's failure to meet its NATO spending commitment. During his recent European trip, he [...]
EU Reform: Missing Golden Opportunity?
9 July 2019 Has the impetus behind European reform, so evident following French President Macron's victory last year, now stalled? The recent Italian election result illustrates that the appeal of populist remedies to Europe's ills has not receded, and Euro-scepticism remains widespread. The challenge remains for Europe's mainstream national leaders, along with the EU institutions [...]
USA and European Union: With Friends Like These…..
24 June 2018 Even in comparison with the recent deterioration in diplomatic norms, the breakdown of the recent Group of 7 meeting was breath-taking. The long-planned gathering, cut short by US President Trump's early departure for his hastily planned Singapore summit with North Korea, began with Donald Trump's advocacy to include Russia in future occasions. [...]
Italy: Growth Not Quitaly is the Remedy
6 June 2018 As a reminder that populist sentiment in Europe has not disappeared, Italy's March election has finally produced an anti-establishment coalition between the Lega and the Five Star Movement (M5S), which appears willing to at least consider leaving the European Union as a remedy for the nation's economic ills. On one level this [...]
Iran Sanctions: JCPOA RIP?
18 May 2018 Despite frenetic diplomatic efforts, including the evident bonhomie between Presidents Macron and Trump, the United States has withdrawn from the Iran Nuclear Deal (JCPOA). The world awaits details of America's new approach to confronting Iran's nuclear ambitions and its aggressive regional political behaviour. The Trump Administration has announced already its intention to [...]
Saudi Arabia 2030: Vision Versus Reality
4 May 2108 In April 2016, Saudi Crown Prince (Deputy at the time) Mohammed bin Salman (MBS) announced his Saudi Arabia 2030 economic strategy. The ambitious plan has two major objectives. First of all, the collapse in oil prices after 2014 requires a major overhaul of Saudi fiscal policy to reduce the huge budget deficit. [...]
US-China Trade: Three Sides to Every Story
17 April 2018 As with any disputed relationship, there are three sides to every story: my version, their version, and the truth. So it is with the deepening Sino-American bilateral trade conflict. In order to reach a workable resolution to the current dispute (which I fully expect), policymakers on both sides need to consider the [...]
Q2 Global Strategy: Iran, Korea, China & Russia Hold the Key
4 April 2018 Enjoy the podcast in which I review how well our 2018 strategic themes are playing out, and take a look athe the rest of the year. Inflation, populism, and protectionism were the key Q1 market drivers, even as the US tax reform boosted American corporate earnings significantly. Personnel changes at the White [...]
South Africa: Dawn of a New Era?
27 May 2018 Financial markets have celebrated the selection of Cyril Ramaphosa as leader of the ANC in December 2017, and his subsequent election as the Republic's president. The beleaguered Rand (ZAR), for example, has rallied over 20% in the past four months. Even the rating agencies have jumped on the band wagon. Both Fitch [...]
Turkey: Can Damaged Credibility Be Restored?
15 March 2018 Turkey has a history of "boom-bust" economic cycles. And, while Turkey enjoyed an impressive 7% GDP gain in 2017, the telltale signs of overheating again have emerged. In February 2018, for instance, inflation stood at 10.3% (granted, a bit lower than previous months), double the central bank's (CBRT) 5% target. And, core [...]
EM Investing: Harder than it Used to Be!
1 March 2018 Emerging Market investing is a lot more complicated than it used to be -- and not just because it is difficult to replicate last year's stellar performance. Prior to the Global Financial Crisis (GFC), EM's superior growth prospects garnered investors' attention. In addition, EM growth and inflation cycles tended to be in [...]
S&P 500: Tipping Point?
13 February 2018 In my 2018 Investment Strategy blog entitled "Aging Rally or More to Play For?", I indicated that while the US (and global) equity market rally was aging in calendar terms, the factors traditionally signalling the end of the cycle were not yet evident. Nevertheless, I suggested that the US market would experience [...]
Swiss Franc: More Weakness as SNB Lags ECB
4 February 2018 In the wake of the Global Financial Crisis followed by Europe's Sovereign Debt Crisis, the Swiss franc (CHF) appreciated sharply (see top Chart), reflecting its traditional role as a safe haven. Confronting considerable deflationary risks the Swiss National Bank (SNB) abandoned its policy aimed at setting a floor for the exchange rate [...]
State Of the Union: Jam Today, Cuts Tomorrow
23 January 2018 On 30 January, President Trump will deliver his first State of the Union speech. To be sure, the state of the US economy is healthy (I will leave it to others to assess the state of the Union). Indeed, GDP has advanced at over a 3% clip during the past nine months. [...]
2018 Strategy Podcast: Aging Rally or More to Play For?
9 January 2018 One of my New Year's resolutions was to broaden the types of content offered on this site to make life easier and more stimulating for investors and subscribers. In this spirit, you are invited to listen to our first podcast. This broadcast summarises a blog published in December outlining key investment themes [...]
2018 Strategy in Pictures: Aging Rally or More to Play For?
15 December 2017 Looking into 2018, one is is reminded of the old stock market admonition that "bulls make money and bears make money, but pigs are slaughtered". In other words, let's not be greedy: the returns of the past year are highly unlikely to be repeated. In an effort to free up your time [...]
US Tax Reform: Panacea or a Risk too Far?
2 December 2017 In a swanky Washington restaurant in 1974, economist Arthur Laffer presented Dick Cheney and Donald Rumsfeld (future VP and US Secretary of Defence) a doodle on the back of a napkin. What appeared was a diagram of the now infamous “Laffer Curve”. The graph depicts the relationship between tax rates and tax [...]
Ireland:Tiger Tamed, But No Longer a PIIGS
20 November 2017 I returned recently from Kilkenny, Ireland where I attended Kilkenomics – an engaging mix of global finance and comedy sponsored by the FT and hosted by the irrepressible David MacWilliams. I often found myself thinking only the Irish could pull off this unlikely mix, but then I look at Twitter, and am [...]
Asia: Coping With Trump, China, and the Fed
2 November 2017 Despite the flare up of dangerous geopolitical risks, Asian assets have performed exceptionally well in 2017. Indeed, after years of underperformance, the 28% gain in Asian equity markets is twice that of the S&P500. Likewise, shrugging off initial concerns after last year’s US election, most of the region’s currencies have appreciated handsomely [...]
Do Markets Believe Central Banks?
22 October 2017 Investors appear convinced that stimulative G-7 monetary policies lie behind the markets’ record-setting performance. To be sure, that was the case between 2009 and 2015. During the past three years, however, I believe the impact of monetary policy has been quite neutral, the key driver of markets more recently has shifted from [...]
European Politics: Berlin, Florence & Brexit
26 September 2017 Despite Europe’s recent economic upswing, Germany’s election result provides a stark reminder of the region’s political discontent in the aftermath of the Euro crisis, protracted unemployment, and increasing income inequality. Following the disappointing elections, can Chancellor Merkel and French President Macron produce the domestic and EU reforms needed to produce European prosperity? [...]
Investment Strategy: Next 6 Months are Key for Trump Presidency
3 September 2017 Welcome to the launch of what will be a regular strategy review. Macro-themes have dominated market moves, especially following the Brexit referendum and the US and French elections. With the Trump Presidency entering a potentially decisive six months, I believe this will remain true during the year ahead. I am a believer [...]
UK: Consumer Weakness Will Persist For Years, Not a Few Quarters
1 August 2017 The recent release of second quarter GDP data had something for everyone. For the post-Brexit sceptics, the meagre 0.3% gain (following a similarly paltry advance in Q1) confirmed the economic recovery was faltering. Recently, weak consumer spending has been a major headwind, resulting from modest income growth and higher prices following sterling’s [...]
President Trump: Lessons from Pittsburgh!
3 July 2017 In announcing his recent decision that America would withdraw from the Paris Climate Accord, President Trump rationalised this choice indicating he represented the citizens of Pittsburgh, not those of Paris. His remarks, however, suggest the President perceives Pittsburgh as a heavily polluting city in industrial decline, requiring the government’s protection from the [...]
UK: Brexit — The Clock is Ticking, Loudly
22 June 2017 The Conservative Party’s failure to gain a majority of Parliamentary seats in the June 8 snap election has shifted the landscape on key policy issues. In particular, Prime Minister Teresa May had asked the British electorate for a mandate to adopt an aggressive stance in upcoming Brexit negotiations, including walking away if [...]
Mr Macron: Europe Needs You to Succeed
3 June 2017 The rift between the Trump administration and the other Group of 7 nations (also G20) became increasingly evident following the gathering in Taormina, Sicily. The new American president’s approach to global trade and climate change (among other key issues) represents a break from the prevailing international policy consensus. Reflecting growing frustration, German [...]
Russia: Living With Cheaper Oil
18 May 2017 From alleged involvement in US and European elections and military campaigns in the Middle East, Russia is rarely far from the headlines. The recent apparent agreement between Saudi Arabia and Russia to extend previously agreed oil production cuts until the end of 2017 not only may improve sentiment in energy markets, but [...]
Mexican Peso: You Haven’t Missed It!
3 May 2017 The Mexican peso has enjoyed a nice rebound in 2017 following its collapse in recent years. With the Trump administration’s approach to its relationship with Mexico seemingly in a constant state of flux, investors are left to consider whether it is too late to buy the MXN or if this year’s bounce [...]
Macron Victory: Stay Overweight Europe For Now
24 April 2017 After the most unpredictable and consequential election in recent French history, Emmanuel Macron and Marion Le Pen have advanced to the second round run-off on May 7. Even with the field now reduced to two candidates, however, the nation still faces a stark choice, as the candidates represent distinctly different visions about [...]
China: Currency Manipulator?
4 April 2017 When Chinese President Xi Jinping visits Florida, trade will be at the top of the agenda. The meeting occurs at a pivotal moment when President Trump’s “America first” agenda has put China in the unusual position of being the champion of liberal global trade. Indeed, America’s withdrawal from the Trans-Pacific Partnership provides [...]
Bank of England: Navigating the Brexit Swamp
23 March 2017 At long last, after a long campaign, referendum vote, and legal challenges, the Brexit negotiations can officially begin. Of the many important issues confronting the markets will be how the Bank of England navigates monetary policy through these uncertain times. This is especially true as the last CPI release saw inflation breaching [...]
Trump & G20: Collision Course
23 March 2017 Two developments occurring over the weekend have the potential to put the United States on a collision course with its trading partners. In order to win US approval, the communique released following the G20 meeting in Baden-Baden softened its previous commitment to countering “all forms of protectionism” – a pledge widely regarded [...]