2017 is drawing to an end, and the bottom line is positive. The outcome is significantly better than we had expected. Since the financial crisis in 2008, the global economy has never expanded more quickly and especially concertedly than in 2017. Also, inflation has surprised on the downside, falling short yet again of the expectations held by central banks and analysts.
Guest author: Jenny Teng, Senior Fund Manager
Jenny Teng is senior fund manager in the equity team of Erste AM. Born in China she is employed since 2008 at ERSTE-SPARINVEST and responsible for the Asian equity markets.
Long enough we have heard about the depreciation of Chinese currency Renmimbi (RMB), but this year RMB has showed rather unusual movements.
Q3 is drawing to its end. Traditionally, this heralds the development of a strategy for the next year, an important part of which is the creation of scenarios. On the basis of the status quo, we have drawn up three further different scenarios in this blog entry.
It is almost impossible to speak with fund managers and not address the economy or monetary policy. Why is that so? This blog entry will try to answer the question on the basis of data from the US equity market from 1950 onwards.
The IFO business climate index calculated by the Munich-based IFO Institute is regarded as the most important German economic indicator. At 115.1, the value released for June last week was the highest since the launch in January 1991. It was also clearly above the value that had been expected by the financial analysts on average. The signs for substantial economic growth in Germany seem favourable.
The US central bank Fed increased the Fed funds rate last Wednesday. The risky asset markets reacted to the move with an increase. At the same time, the US dollar depreciated. How can that be explained?
Equities have recovered from their beginning-of-year slump, and bonds, especially corporate and emerging markets, have recorded impressive gains. The loosening of the monetary environment in China and the continuation of the loose monetary policy in the USA have reduced the risk aversion of investors. In terms of asset allocation, we generally prefer default risk. Equities remain underweighted.
The US central bank signalled the continuation of its loose monetary policy at its FOMC meeting on 27 April. This is remarkable given that along with the short-term stabilisation of the Chinese economy, this Fed policy is one of the most important reasons for the price rises of risky assets since February.
We are almost approaching the end of the summer but it looks like we are back to April 2015 in Turkey. The election outcome and aftermath did not work as politicians had desired and the efforts to form a government have failed so far.
Global GDP growth has probably only increased marginally in Q2 after the very weak Q1. Economic activity has thus remained disappointingly weak on a global scale.