US President Trump is calling for a payroll tax relief until after the US elections. Australia just announced a EUR 11 billion package to counter the adverse impact of the coronavirus. The European Commission set up a fund yesterday with EUR 25 billion to tackle to economic shock caused by the virus. The UK raised already anticipated fiscal stimulus by another GBP 18 billion. And these are just a selection of the number of measures that is being announced. Most measures are, however, disappointingly limited. The European Commission’s investment fund represents just 0.2% of GDP, and are taken from existing resources. Hence, the reluctance of governments to really open the tabs increases the odd of a global recession. Forecasts for 2020 GDP growth are around 2.0% (2.4% by the OECD) … [Read More...]

The US consumer, which represents a bigger share of global GDP than China’s economy, has been the main driver of US GDP growth in recent quarters. Spurred by job and wage growth, consumer spending has been robust. And from a top-down perspective, there are few signs that this is about to change. However, some underlying factors suggest that weaknesses in US consumer spending are starting to appear. For example, in recent weeks, initial jobless claims started to rise gradually to levels that could raise the question if we have seen the bottom in unemployment. Last week, however, initial jobless claims fell from 228K to 213K, and also lower than expected making it difficult to conclude initial jobless claims are on an ascending path. Yet it is… [Read More...]

The Australian equity market has moved cautiously up in early trading with investors not sure how to deal with the tech losses in the US [Read More...]

The US yield curve has (almost) inverted, and this has been making headlines for the last couple of months now. This should come as no surprise, as the yield curve is perhaps the most reliable recession indicator out there. But what does an inverted yield curve tell us about future returns? Our analysis shows that while asset class returns in general are somewhat subdued between the first date on which the yield curve inverts and the start of the recession, the inversion of the yield curve is not followed by extraordinary deviations in returns. Definition Before moving over to the results of our analysis, we would like to dwell briefly on the definition of the yield curve, and the combination of maturities in particular. In most empirical … [Read More...]

US consumer confidence rose for the fourth consecutive month in October, and has now reached an 18-year high. But while this is certainly an impressive milestone, the sharp increase hasn’t really come as a surprise. There are many positive economic signs that should ensure US consumers remain a key driver of economic growth in the coming quarters. A number of factors are contributing to the supreme level of confidence among US consumers. One of the most important is the labor market, where unemployment has fallen to 3.7% – the lowest level since 1969. Moreover, the latest labor market figures emphasize the US economy’s role as a job creation machine. Another 250,000 jobs were added in October, exceeding expectations. It is now eight years since payrolls fell during a… [Read More...]

The Turkish lira has taken a heavy pounding recently as investors have started to doubt the country’s creditworthiness and economic outlook. At the time of writing, the value of the currency has collapsed to 0.16 against the USD – down almost 40% since the beginning of this year. Sentiment has soured towards the lira, pushing the currency to a series of record lows and sending a shockwave through the financial markets. In this week’s ‘Graph of the week’ I provide an overview of the potential impact of Turkey’s currency crisis. Turkey Obviously, the sharp depreciation of the lira is having a profound impact on Turkey itself. Currency weakening has a number of adverse effects, which can easily result in negative feedback loops. First, the lira’s dramatic fall will … [Read More...]

“Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” Clever words found by Fed boss Yellen to make sure that investors are not getting to anxious about future rate hikes. But it was the ‘dot plot’ that really did the job. FOMC participants significantly lowered their projections for what is the appropriate level of the federal funds rate for the coming years. Hence, lower rates for longer. Mind you, markets expect the Fed to take it even more easy than the new dots imply. Markets expect the #Fed to take it even slower than the dots. Nice chart via @davidmwessel http://t.co/Mo9iqwfQO0— jeroen blokland (@jsblokland) March 19, 2015 The dovish message by the Fed … [Read More...]