Policy
Investors in Europe and the American West are already starting to think about the implications of the 2024 election, given that sticky inflation and tighter monetary policy keep the risk of recession elevated.
The first legislative meeting of Xi Jinping’s third term suggests that Chinese policy is continuous and consistent with the previous ten years, which is negative for long-term productivity.
In this report, we look at data releases over the last month and implications for currency markets.
The development of trading blocs and the rise of economic warfare will lead to the inefficient allocation of resources. Higher fiscal outlays and tight commodity supplies will feed into energy prices driving headline inflation. It also will drive demand for inventories as hedges against supply volatility globally higher. We remain long equity exposure via ETFs to oil and gas producers, and metals miners. We also retain our exposure to commodities via the COMT ETF.
The combination of collapsing energy inflation and cooling wage inflation means that euro area core inflation will slump later this year. We discuss the consequences.
There has been a paradigm shift in Beijing’s approach to policy stimulus. The main purpose of government policy is now managing downside risks to the economy in both the short and long term. The priority for the central government is to build an economic and financial system resilient against potential negative shocks, including external threats.
The Chilean economy is entering a recession. Inflation will drop rapidly and the central bank will cut rates meaningfully in H2 2023. We continue to recommend a structural overweight across Chilean risk assets on the basis of falling inflation and local yields, record cheap valuations, and dissipated political volatility.
A run of hot January data shook up financial markets, but we think they overreacted. We remain constructive on equities and the economy in the near term.
In this week’s report, we speculate on the evolution of euro trading in light of the near-term hiccups, but tremendous value that can be unlocked for longer-term investors.
In this week’s report, we speculate on the evolution of euro trading in light of the near-term hiccups, but tremendous value that can be unlocked for longer-term investors.