The Paris climate conference has yet again confronted the public with the importance of a sustainable and environmentally friendly economy for the future of our planet. The goal of imposing a cap on global warming of below two degrees centigrade requires a Herculean effort. Paul Severin interviews Clemens Klein, senior fund manager about the results of the conference.
Erste Asset Management discloses the CO2 footprint of its equity funds for the first time. The CO2-intensity of all EAM equity mutual funds is at 70.6% as compared to the MSCI world index. Our three responsible equity flagship funds are even below 50% of the referential value.
With the current outcome, the uncertainties in Turkish economies are off the table. AKP (governing party Justice and Development) will now have 316 seats in the parliament. This is enough to form a single party government, still, it falls short of constitutional majority – the most market friendly outcome. There will be a positive sentiment as Turkey goes back to business. After a period of deepened political uncertainties, the election outcome leads to some relief on Turkish capital markets.
The US central bank Fed hinted at an increase of the Fed funds rate in December at its meeting on 28 October. A bias towards such an increase is referred to as tightening bias.
If the economic data permit it, the Fed will increase the Fed funds rate from practically zero percent. The extent and the speed of the increases will remain low. On a global scale, we can see deflation pressure (pressure for prices and wages to fall). The strong US dollar already has a negative impact on the US economy, the financial markets are still unstable, and the so-called natural interest rate, which comes with full employment and stable and low inflation, has fallen clearly in the past years. The outlook for the risky segments of the financial market remains positive in the short run, but uncertain in the medium term.
Turkish early elections to be held on 1 November, 2015; and once more, the market is waiting for a positive outcome. Neither the country nor the market has more tolerance to absorb any further political uncertainty; however, the election outcome may not be too different from the results back in June 2015. Nevertheless, this time Turkey is closer to a coalition government.
The arguments supporting a further rise in share prices have become stronger. The important central banks have been sending expansive signals in recent weeks, i.e. signals that support the economy and the markets. The latest measure was the statement made by the president of the European Central Bank (ECB), Mario Draghi, at the ECB press conference on 22 October.
Only in a few months we will likely know, whether the bull market that started in mid-2009 really ended in the summer of 2015. What we know, however, is that the headwinds that have emerged in recent months will not recede anytime soon. Another challenging quarter, it seems, lies ahead of equity investors.
The beginning of Q4 is the time for an outlook on the coming year. At first we want to establish the determining factors for the economic activity and the markets. On this basis, we will introduce three scenarios.
The current refugee crisis is immense. Estimates expect more than a million people to apply for asylum this year in the European Union; i.e. we are talking about 0.2% in terms of total population. This would suggest that the immigration can be handled if all the countries cooperate.