Economics

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Filling the gap

A perfect storm of tighter regulation and problematic historical loans is putting the crunch on bank lending. This offers an opportunity in 2018 for other non-bank providers to step in, says Alcentra’s Paul Hatfield.

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Rinse and repeat… indefinitely

The story of the post-global financial crisis world has been one of crisis… response… improvement… complacency (CRIC), then repeat, says Iain Stewart, Real Return team, Newton. But can central banks ever break free from their stock response to financial economic stress?

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Fighting Fires

America’s midterm elections, Italy’s Five Star Movement and Brexit have the potential to amplify geopolitical risks in the year ahead. Have investors become too complacent about their potential impact on markets, asks Mellon Capital’s Sinead Colton?

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The ‘everything’ bubble

Central bankers would like investors to believe they can withdraw monetary stimulus and normalise interest rates in 2018 without negative consequences. That view is naive, says Newton’s Nick Clay.

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Finding the upside in falling prices

From Europe to the US, central banks are on a mission to normalise monetary policy in 2018. But for Newton global strategist Brendan Mulhern, their fixation on inflation data as a gauge of economic health is a bad case of mistaken thinking.

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Reform matters

The Trump administration wants to radically alter the US regulatory landscape. Here, The Boston Company’s John Bailer argues that more pro-growth, pro-business policies would be positive for stock returns in 2018, but thinks even without them the outlook is bullish for US equities.

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High risers

With valuations for US commercial real estate at all-time highs, a focus on first-lien debt and bridge loans could make sense for investors in search of attractive opportunities in 2018, says Sandeep Bordia, head of research and analytics, Amherst Capital Management.

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A question of renewal

Ageing US infrastructure presents major new growth and investment potential as politicians, planners and investors consider new ways to drive its renewal in 2018, says The Boston Company’s Brock Campbell.

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Industry 4.0 – the robot revolution

The first Industrial Revolution introduced machines into manufacturing. The second saw the emergence of assembly lines. The third brought robots into industry. In recent years there has been much talk of a fourth Industrial Revolution. The team at Walter Scott wanted to get under the bonnet of this nascent technology. Here, it highlights how this may influence businesses in the year ahead, and beyond.

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Focus on: Emerging market fixed income

As central banks continue their programme of policy normalisation, managers from Insight and Standish consider a crucial question: can EM debt continue to offer both high yields and attractive returns?

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Focus on: high yield and global credit

Central bank monetary policy shifts, growth in electronic trading and evolving risk appetites all look set to be key themes for 2018. Here, managers from Insight and Mellon Capital consider the year ahead.

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The future of Libor?

Few benchmarks can have been subject to as much debate as Libor - the London Interbank Offered Rate. On 1 February 2014, after a series of regulatory interventions, the UK’s Financial Conduct Authority (FCA) transferred oversight to the US Intercontinental Exchange (ICE) Benchmark Administration to provide a stronger governance framework.

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A total eclipse?

Since the 1990s, US technology companies have had the edge in the race for global internet leadership. In 2018, that could change, says Siguler Guff co-founder, Drew Guff.

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From the outside looking in (Archived)

Those with a yearning for stability could do worse than choose Japan in 2017, according to BNY Mellon’s Miyuki Kashima.  The year ahead looks bright for the world’s third largest economy, she says.

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Onwards and upwards (Archived)

Increased state intervention – and the greater use by governments of the cheap funding available to the public sector – seems inevitable in 2017 and beyond, says Real Return team leader Iain Stewart. In the minds of policy makers, the transition from low interest rates to no interest rates and the shift from buying government debt (QE) to purchasing other assets appear to represent a logical and seamless progression of monetary policy.

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Riding the rental revolution (Archived)

A booming US rental property sector is attracting new interest from a range of commercial and institutional investors but can this growth be sustained? Here, Amherst Capital Management’s Sandeep Bordia considers the market outlook for 2017.

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Focus on: developed markets fixed income (Archived)

Ongoing central bank interventions, increased political risk and the potential for rising defaults all look set to be key themes for 2017. Here managers from Insight Investment and Standish ask the question: what could the next 12 months have in store for Fixed Income investors in developed market? 

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Focus on: emerging markets fixed income (Archived)

In 2016, tightening US monetary policy and collapsing commodity prices were something of a spanner in the works for emerging markets. Does 2017 offer better prospects for fixed income investors? Here, managers from Newton, Standish and Insight consider opportunities in the world’s emerging markets for the next year

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Focus on: global fixed income (Archived)

For sovereign corporate debt investors, 2016 offered its fair share of surprises – not least an unexpected vote for Brexit, a rancorous US election and a world of central bank-fuelled negative yields. But could 2017 offer more of the same? Here, fund managers from Insight Investment and Newton give their views on the likely opportunities and challenges over the next 12 months.

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Regime change (Archived)

Despite a steady outpouring of market-moving news over the past year, currencies have largely shrugged off events, causing many investors to expect a new, lower volatility regime in the months ahead. But there are reasons to believe the prospect of higher volatility exists and with it the resumption of currency trends in 2017.

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At the peak (Archived)

Frothy valuations and a crowded fundraising market mean global returns from private equity may fall in 2017, though it is still expected to outperform more traditional asset classes, according to Siguler Guff’s  Ralph Jaeger.

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Globalisation meltdown (Archived)

De-globalisation trends are rife. As governments retrench to focus more domestically and political change continues unabated, Sinead Colton, head of investment strategy at Mellon Capital, discusses key milestones for the year ahead and what they might mean for global markets and investor expectations.

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Rules of engagement (Archived)

Is the UK likely to become more isolated in 2017 and what will this mean for its economic growth? The renegotiation of its trading relationship with the rest of Europe will be a central focus for the year ahead, with uncertainty likely to continue. Here, UK equity manager Christopher Metcalfe discusses what may be in store, highlighting areas of concern and the sectors that may hold opportunities.

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Liberté, égalité, Frexit? (Archived)

France’s unruly elections demonstrate how the sources of political risk facing the eurozone are shifting in 2017 from the European Union’s peripheral member states to those at its core.

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The end of monetary policy? (Archived)

As global quantitative easing (QE) increases and interest rates outside the US continue to be cut, Insight Investment’s inflation-linked corporate bond manager, David Hooker, assesses the practicality of monetary policy in the coming year.

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Buyback or pay-out? (Archived)

The US is a market as known for its share buybacks as for its pay-outs. Here John Bailer, US equity income manager at The Boston Company , explores US dividend trends and looks at what income investors might expect in the year ahead. What headwinds do companies face in 2017?

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More of the same? (Archived)

Protectionism may be on the rise but the world is so interconnected today it may not be as far-reaching as some expect and many global companies remain well-situated to maintain delivery of sustainable income in 2017, says Newton global income equity manager Nick Clay.

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Disruptive forces (Archived)

With rising global trade barriers, increased uncertainty around the sustained direction of US interest rates and questions over Chinese growth, 2017 could be a watershed year for investors in emerging markets. Here, Rob Marshall-Lee, leader of Newton’s emerging and Asian equity teams, looks at some potential winners and losers.

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The cycle turns (Archived)

Rising volatility, increased leverage and escalating defaults all suggest a challenging backdrop for fixed income in 2016, but do recent data point to a credit cycle tipping point?

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Japan’s productivity paradox (Archived)

Once seen as the crucible of hi-tech approaches to improving productivity, Japan is now better known for its ageing society and persistently anaemic inflation. Under prime minister Shinzo Abe’s latest reforms, however, that could be set to change.

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The never-ending story (Archived)

Since the global financial crisis, forces of change have buffeted the defences of the European Union (EU), threatening to damage it forever. What does the 2016 chapter have in store?

 

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Weathering adversity (Archived)

Russia defied expectations in 2015 with its response to the twin challenge of western sanctions and plunging oil prices. Here Standish’s Urban Larson and Insight’s Robert Simpson ask what’s in store for the country in the year ahead.

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The big issue (Archived)

Standish’s Raman Srivastava and Newton’s Khuram Sharih consider how increased issuance in 2016 will impact bond market volatility and appeal.

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The last 'safe haven' (Archived)

Reversion to mean is a powerful force in markets. For many asset classes currently “priced to perfection” this would represent material losses in 2016. For inflation it could mean significant gains.

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Unorthodox measures (Archived)

While many developed Western economies resorted to full blown monetary stimulus in the wake of the financial crisis, Asian countries have been more restrained in their policy response. Here, Douglas Reed, emerging markets strategist at Newton, asks whether 2016 could herald a change.

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Retreating expectations (Archived)

With global growth in retreat, 2016 looks set to present the world’s central banks with a dilemma: should they continue with QE or will they be looking at new ways of inflating their way out of debt?

 

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A multi-speed world (Archived)

In a year marked by a series of record highs followed by major sell-offs across asset classes, investors in 2015 could be forgiven for thinking uncertainty was the new normal. Here Mellon Capital’s Vassilis Dagioglu considers some of the possible causes of volatility in 2016.

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Global outlook: Rates, recession and recovery (Archived)

The US Federal Reserve (Fed) is likely to raise rates by September, according to economists at Boston-based Standish.The group’s chief investment officer, David Leduc, says US growth will continue for the remainder of 2015 albeit at a slower pace than originally forecast as the headwinds faced in the opening quarter of the year will prove difficult to shrug off entirely.

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The waiting game (Archived)

Latin America’s leading economies are facing serious headwinds but with a raft of upcoming elections in the second half of the year there may be scope for optimism say Insight’s Colm McDonagh (head of emerging markets fixed income) and Rodica Glavan (emerging market fixed income portfolio manager).

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The road ahead (Archived)

While the concept of driverless cars once conjured visions of a distant high-tech future, new manufacturing and scientific techniques look set to make their introduction a reality - bringing a potential raft of new social and economic benefits.

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US housing stands on firmer ground (Archived)

With the US housing economy still in recovery mode more than six years on from the peak of the financial crisis, what do the coming years have in hold for US housing and what role do the so-called ‘millennials’ have to play in this story? Carl Guerin, research analyst and Raphael Lewis, primary research analyst on The Boston Company’s US Opportunistic Equity team, discuss.

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Holding the faith (Archived)

Global market uncertainty is prompting China to find new ways of boosting domestic growth. But, despite the many challenges facing the Chinese government, its economic plans remain broadly on track and ongoing reforms could deliver significant long-term gains, says Amy Leung, a member of Newton’s Asian equity team.

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Dilma's dilemma (Archived)

Political uncertainty may have subsided following the election but with the Brazilian economy in the doldrums and commentators banging the drum for harsh reforms, what are the prospects for the dilapidated poster-boy of South America?

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Dancing to a different tune (Archived)

Fear and greed drive financial markets: with so much uncertainty with regards to the contrasting economic prospects around the world over the next 12 months, fear currently has the upper hand.

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Will a tightening US labour market mean inflation and higher interest rates? (Archived)

As the US economy continues its slow recovery, investors are focusing their attention on the role falling unemployment and the potential for rising wages may play in fueling a broader rise in inflation and higher interest rates. BNY Mellon chief economist Richard Hoey says that both wage inflation and core inflation in the US have recently bottomed. “We believe that they have begun a gradual, multiyear uptrend which will not end until 2017 or 2018 in an environment of restrictive monetary policy,” he says.

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Beware of hidden dangers ahead (Archived)

Despite an apparent transformation of UK economic prospects, Iain Stewart, head of Newton’s Real Return team, believes wider policies designed to manufacture growth could pose significant long-term risks to recovery both at home and abroad. 

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Making 'Abenomics' work (Archived)

Japan’s employment market is showing signs of better health as a result of wider economic reforms pressed through by Prime Minister Shinzo Abe, leading to some managers becoming more positive in their outlook.

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Japan at Inflection Point (Archived)

The recent political and economic turnaround in Japan is only the beginning of a long-term economic recovery, says Miyuki Kashima, head of BNY Mellon Investment Management’s Japan equity team. With an unprecedented political will and support for reform in place, she believes Japan is at a major inflection point.

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Unconventional fix (Archived)

Iain Stewart, who heads Newton’s Real Return team, expects policymakers will continue to walk a tightrope between generating economic growth at almost any cost, and maintaining real interest rates at low enough levels to service liabilities that are unprecedented in peacetime.

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Market Overview: Developed world to lead 2014 global growth (Archived)

BNY Mellon chief economist Richard Hoey expects the lead engine for global growth in 2014 to be developed economies supported by aggressively easy monetary policy and continued post-financial crisis recovery. Hoey sees global GDP growth in 2014 accelerating by 0.5%-0.75% from the average pace near 3% in 2012 and 2013. The four main causes of that faster growth, he says, should be:

1 Past and ongoing monetary ease
2 Reduced fiscal drag
3 Moderation in the post-crisis deleveraging of the private sector
4 Moderate energy prices, given the expansion of new sources of energy supply, especially in the US.

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