United Kingdom

Strategy

Twin peaks: the law of averages and the zero lower bound

In pricing fixed income securities, a lot hangs on the difference between the mean, median and mode. Markets reflect a probability-weighted average of potential outcomes (i.e. the mean); policymakers typically focus on the single most-likely outcome (i.e. the mode). Thinking carefully about the difference has important implications for how we view interest rate risks.

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Economics

Why did the BoE just hike? What happens next?

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.

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Portfolio Thinking

Smash hits and crash dips

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.

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Macrobites

Birthday matters

It's time to celebrate Macro Matters' first birthday, and reflect on our first year of blogging!

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Portfolio Thinking

Sell the rumour, buy the fact

With Philippe Coutinho and Alexis Sanchez staying at their clubs, the most recent football transfer window offers a great example of the availability bias at work and a counter example to the common investment adage “buy the rumour, sell the fact”.

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Economics

Car-ry on spending?

Just like cars, it costs more to maintain an older person than a younger one. Government borrowing could rise by 3% of GDP over the next 20 years as a result of ageing. To offset this, the UK government has squeezed the rest of the public sector in an attempt to balance the books. This seems politically unsustainable. Is the government about to reverse course by ending public sector pay caps?

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Macrobites

Splinter is coming

While the UK prepares to break away from the EU, the voting age population is evolving. When the transition concludes, younger people’s views could be significantly under-represented. Adjusting for this could lead to some very different conclusions.

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