Capabilities

From the end of the last recession, we are inevitably moving towards the next one. The only question is when it will occur. Economic indicators suggest solid underlying conditions, and that a recession is not imminent. However, with inflation expectations hovering around concerning levels for central banks, the Fed is clearly demonstrating a willingness to forego economic growth in order to achieve price stability. While in previous circumstances, the Fed has come to the rescue when financial markets have tumbled, this assumption is likely gone for now as the Fed’s focus is clearly centered around fighting inflation. As a result, market risks lie ahead, a sentiment to which we remain attuned.

We discuss factors contributing to what some experts in the U.S. are calling the tightest labour market in 70 years.

In this week’s commentary we discuss low inflation in Japan.

When most countries are wrestling with rising inflation, Japan is the outlier.

Six-month growth rates of UK narrow and broad money – as measured by non-financial M1 / M4 – fell in March. With six-month consumer price momentum rising further, real rates of change moved deeper into negative territory – see chart 1. Chart 1 The six-month contraction in real narrow money in March was slightly larger […]

Global six-month real narrow money growth fell to zero in March*, the weakest since the GFC and a level historically consistent with recession – see chart 1. (The current reading matches a low before the 2001 recession.) Chart 1 A rebound in six-month industrial output growth, meanwhile, extended in March, reflecting a production catch-up from […]

We discuss the impact higher input prices are having on household sentiment, consumer behavior, and the service economy.

March CPI numbers globally have mostly surprised on the upside (again) but monetary trends and other considerations continue to suggest significant relief in 2023-24. G7 annual CPI inflation rose to 6.8%* in March, the fastest since 1982. A post in September 2020 presented a “monetarist” forecast that G7 inflation would average 4-5% pa in 2021-22, i.e. between […]

We discuss the old school industries giving the term FANG a new meaning.

In 2013, the investment world was introduced to the term FANG by CNBC’s Mad Money host.

In this week’s commentary we predict that a 2% inflation goal in the U.S. is not achievable for many years to come.

The moves this cycle have been happening faster than usual. The US yield curve, measured by the spread between 10-year and 2-year yields has turned negative in a record short period following the Fed’s first interest rate increase. While each recession since the late 1960s has been preceded by this inversion, there are several key differences this time. Notably, the Fed’s preferred yield curve recession indicator is still quite steep, it is not yet clear how quantitative tightening will impact yield curves, Canada’s 10-year less 2-year yield curve is not yet inverted, and corporate sector profitability as well as consumer savings remain high. While we don’t believe a recession is imminent, we are closely monitoring developments.

We discuss market reaction over the ongoing presidential election in France and provide an update on three of our French holdings.

The monetary indicators followed here continue to give a negative signal for the global economy and risk assets. The indicators have been depressed by an inflation squeeze on real money balances and this drag is probably peaking. Any relief, however, may be offset by a further slowdown in nominal money growth due to over-aggressive withdrawal […]

Mobility is essential to our daily life and economic growth, yet moving people or goods from place to place has a great impact on the environment. In this week’s commentary we discuss the road to sustainable mobility.

International equity strategy

Emerging markets were weak in Q1 2022 initially on higher inflation as the Federal Reserve turned more hawkish then in response to the Russian invasion of Ukraine.  Markets hit a closing low on 15th March and recovered a little into the quarter end.  The EM index fell 6.06% in local currency terms and 6.92% in […]