The markets are still discounting the inflationary impact of Trump’s measures. Furthermore, they are anticipating the positive effects of his fiscal policy, the best short-term guarantee of which is in economic agents’ shift in expectations. Our criticism of excessive complacency on these issues is well-known, although it’s true that the market doesn’t see it that way.
Janet Yellen intends to hold firm against market pressure as her press conference showed yesterday. The 0.25% rise in federal funds was downgraded to a modest move, wholly anticipated by investors, while hinting at a moderate path in rate hikes over the next couple of years.
Natixis AM | The Fed decided On Wednesday to increase its main rate by 25 bp. The US central bank had mentioned so many times this hike that it has to do it. But what will happen now?
Reliable economists coincide in assuring us that if populists like Podemos got into power, it would mean a “a fast and intense” deterioration in GDP. But social inequality, characterised in the developed countries by the empoverishment of the middle class, is already causing alarm bells to ring in the economic world which pays more attention to global trends.
J.L.M. Campuzano (Spanish Banking Association) | Many argue that the conditions are not there for an uptick in inflation on a global scale. Well, that’s true: weak world growth, globalisation and a still negative output-gap in many developed countries (and emerging ones). But are we not being carried away to some extent by the disinflation inertia of the last few years? All eyes will be on the US Fed’s decision on interest rates and its forward guidance at this week’s meeting.
Julius Baer Research | Emerging markets are still in a trading and not in a trending environment. The past was about central banks and monetary policy. 2017 will be about politics. We divide 2017 into two phases. In Q1/Q2 2017 we expect emerging markets to underperform and believe that there is a buying opportunity sometime in Q2 2017.
Pablo Bejar | For the first time since 1982-83, the Latin America and Caribbean region is expected to be in recession for two consecutive years (2015-16). According to World Economic Outlook forecasts, growth is expected to be -0.6% this year following growth of -0.03% last year. The fall in commodity prices, lower global trade and continued weakness in advanced economies, combined with a set of internal factors in some of the larger regional economies, have driven growth lower.
Julius Baer Research | The combination of a positive economic growth narrative, like the fiscal boost under President-elect Trump, and good economic data, creates a powerful positive US consensus. Self-limiting forces of a stronger US dollar and higher interest rates are slowly emerging.
UBS | It looks increasingly likely that at its meeting on 30 Nov next week OPEC will agree the production cut envisaged at its Sept extraordinary meeting. In Sept an OPEC-14 produc tion target range between 32.5 -33.0Mbd was agreed, designed to accelerate inventory draw -down and bring fwd re-balancing.
Someone like Donald Trump emerging on the world stage threatens to make too many changes in the status quo, some of which will have a particular impact on Europe’s economies and especially Spain. One area which appears likely to progress at a cruising speed in the short and medium-term is Defence spending. This is a particularly sensitive issue and one which Obama already tried to have modified during his mandate.