The BoE is in a difficult spot. Lower trend growth and a weaker pound mean that if it doesn't hike rates, inflation could remain above target. But if it raises rates too fast, the economy could be hurt should downside risks materialise.
2017 looks set to mark the first year of an emerging market (EM) growth pick-up after six years of successive slowdowns. The growth acceleration is not only driven by the high-profile recoveries of Russia and Brazil, but comprises about 70% of the EM universe. So what could lie in store for EM in both the short and medium term?
2017 marks a number of financial anniversaries; the 1987 stockmarket crash, the 1997 Asian financial crisis, and the beginning of the global financial crisis. As we haven’t really experienced an extreme boom or crisis recently, looking back will be a refresher as to what could occur, but also provide a wider perspective on investment returns. Nothing is as evocative of the past as its music, so we accompany our look back with a soundtrack of those hits we think have withstood the test of time, and those hits that we would rather forget.
With the country saddled with high debt and unstable politics, Italian debt markets have persistently underperformed European averages for the last couple of years. This pessimistic narrative is definitely seductive but we believe it is dangerous to get sucked into an excessively negative outlook. The debt problems are chronic rather than acute, the politics are not obviously more unstable than usual, the ECB is being flexible with asset purchases, and the return potential could be greater than it first appears.
Just as Hobbes’ Leviathan saves the people from the horrors of constant struggle and chaos, we ask whether the Chinese state can save the people from a hard landing.
In 1979, Pink Floyd cried "Hey! Teachers! Leave them kids alone!”. Ironically, this marked a turning point. The contribution to US wage growth from educational attainment appears to have peaked since the early 80s. This is just another brick in the wall in our argument of weaker US trend growth.