The consensus expects a modest economic revival in 2020, enough to keep the global expansion going, but not sufficient to generate inflation or force policy tightening. We present three themes that could challenge this narrative:
Economics: Recent data underscore risk to growth
With yields inverted and a slump in global manufacturing, investors are increasingly worried about the prospect of a US recession. We do not think recession is the most likely outcome over the next 12 months, but there is a risk that a period of sluggish growth and disappointing corporate earnings turns into something nastier. Here’s how...READ ME
Global debt ratios have continued to rise over the past decade, as low interest rates kept the world growing in spite of secular economic weakness. After a brief market panic in 2018, the prospect of renewed central bank easing has supported sentiment and re-ignited the search for yield. But where is the balance sheet to ‘reflate’ global demand?READ ME
Economics: Fed’s grasp of the economy can slip
Markets: Fed losing control of the funds rate?
Politics: New era of arbitrary political risk for tech
Economics: Fed’s summer vacation is cut short
Markets: Powell polishes his put
Politics: Bullying Mexico
Global growth has slowed materially in 2018, contrary to consensus forecasts 12 months earlier. Three forces are to blame: (i) deteriorating financial conditions; (ii) Chinese policy tightening, and (iii) trade-war uncertainty. EMs have suffered most. While a global recession is unlikely, weak growth provides a choppy environment for markets in 2019.READ ME
Economy: Real growth for now, but this isn’t 1969
Markets: Real yields have limited impact on stocks
Politics: Realpolitik in the South China Sea
Economy: Tariffs nipping at growth?
Markets: Tighter liquidity starting to bite
Politics: Democrats lock onto Trump, little else
Fed tightening, EM crises, tech “bubbles”, a long expansion, potential yield curve inversion – there are striking similarities between the current macro environment and the late 1990s. But the nineties also produced a productivity boom. Toxic politics and poor technological diffusion could prevent a similar revival today.READ ME
Investors are worried about central banks overtightening, particularly with the flattening US yield curve. While the curve remains a useful signal, there is a huge difference between ‘flat’ and ‘inverted’. US officials have a long tradition of ignoring inversion but it would take an unduly brave Fed to force the issue today.READ ME
US monetary tightening is widening global risk premiums, affecting a wide range of asset prices – tech stocks, EM borrowing costs and even European periphery bonds. The US dollar has also strengthened recently, a move which – if it went further – could have important implications for global financial markets.READ ME
The consensus expects a dull 2018, with solid global growth, a modest pickup in inflation and gradual monetary tightening. We look for risks. China is the clearest threat to the global cycle, though a G7 inflation surprise is likelier. Market-based risks (yields, USD shortage) seem more imminent than macroeconomic dangers.READ ME
US sanctions have come just as Turkey’s overheating situation reaches a crunch point. Here we assess the outlook for what could be Turkey’s worst economic crisis since 2001.
One of the first steps that the Bharatiya Janata Party took after assuming office in the southern state of Karnataka earlier in May was to waive farm loans up to Rs100,000 (US$1,500) each. The state government that introduced this measure lasted only two days, but its successor is under pressure to continue with the estimated Rs530 billion write-off. All parties are wooing the rural voter in the run-up to India’s 2019 general elections. Below we examine how India’s troubled rural economy will shape the economics and politics of the country in the next 12 months.
Over the last 12 months we have closely followed Muhammad bin Salman’s relaunch of his Kingdom. In this note we join up the findings of the past year of research to answer the question: what will the new Saudi Arabia look like?
At the six-month mark to the October general election, important parameters have been set on what is still shaping up to be Brazil’s most unpredictable presidential race in three decades. In the wake of the high-profile imprisonment of former President Lula – the country’s current presidential frontrunner – fragmentation remains the rule of the game: myriad dark horse candidates across the political spectrum have entered the race in the absence of strong consensus centrist candidates. Another trend is the growing anti-establishment movement, with new players eager to surf the wave of rising popular anger. Over the next three months, political parties will begin to forge electoral alliances with an eye to aggregating more free, mandatory TV/radio electoral ad time for their candidates; such alliances will be key to monitor.READ ME
Widening twin deficits and rising inflation are fast emerging as risks to India’s macroeconomic stability that will threaten the nascent growth revival.READ ME
Turkey: Brunson on US-Turkey vs Turkey on EM
Turkey: Investor call reveals blind spot
Global: Rising inflation raises macro risks
China: Weak data to accelerate stimulus
Brazil: Polls to dictate market sentiment
India: Weaker rupee: worsening fundamentals
Russia: Tax: Sechin vs Siluanov
Mexico: Direct exposure to Turkey via BBVA
Indonesia: Two more hikes to come
Turkey: Limited contagion no comfort for EM
Global: Could US tariffs be bullish for EM?
China: The road to 15% RMB depreciation
Brazil: Electoral volatility positioned to rise
India: Easing regulation still has further to go
Russia: Sanctions and new tax threats
Mexico: Great expectations risk disappointment
Philippines: Growth number hit by net exports
August EM slide deck: EM in charts: Trade War to Currency War
Risk: We maintain our negative call on overall risk.
Russia: We move to a positive call on equities following an easing of sanctions risk.
Brazil: We move to strong negative on faltering recovery and rising political risk
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We have a 30 year track record of successful calls. Many of these calls combined economic, political and market analysis.READ MORE