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The House View : Taking a step back

July 25, 2017
As markets enter into the summer lull, it is useful to take a step back. The global economy is in better shape than it has been in several years. This has allowed other central banks to follow the Fed and gradually start their exit journey, a process that is a historic challenge given the unprecedented level of monetary accommodation. But with inflation still below target, a key part of the normalisation puzzle is still missing. Although labour market tightness has not yet fed to wages, and hence to inflation, we expect it will. Core inflation should move higher over the medium-term in the US and Europe, supporting further monetary tightening and a normalisation of yield curves. While no policy change is expected by the Fed on 26-July, an announcement to begin phasing out its balance sheet reinvestment is likely in September and we expect another rate hike in December. As for the ECB, rate hikes are still far off, and we expect the central bank to announce another QE extension and tapering in October. Our global macro outlook is little changed this year. We expect growth to rebound from the slowest pace post-crisis in 2016, though relative to consensus we are more positive on the US and more bearish on Japan. In China, we continue to expect a gradual deceleration, but see upside risks to growth in the second half of the year. We are generally constructive on risk assets, expecting material upside to US equities in the next 18 months and positive but more balanced performance in EM. There are signs the dollar has peaked, but we do not expect a material devaluation yet. We are more positive on the euro, seeing upside versus the dollar and sterling. We expect yield curves to normalise gradually, but there is risk of a more sudden upward shift, depending on the path of core inflation. David Folkerts-Landau, Group Chief Economist Key pages this month: P6 Global economy in a better place P8 Central banks overview P11 Current low inflation regime vs. 1960s and 1980s P17 Signs of dollar top You can access a two-page update of Deutsche Bank Research's views on global macro, monetary policy and markets, as well as some of the key themes driving them, at any time by downloading The House View Snapshot from: houseview.research.db.com. [more]

More documents contained in "The House View - Snapshot"

29 Documents
November 25, 2020
1
The global economic outlook has improved since September thanks to the positive vaccine news, and we now see global GDP returning to its pre-virus levels in Q2 2021. Significant risks around this forecast remain both to the downside (if the virus were to spread more severely this winter or a vaccine rollout were delayed) and the upside (if a vaccine rollout is quicker than anticipated). [more]
September 24, 2020
2
Over the summer months, the outlook for the global economy and financial markets has brightened. As such, we now see the global economy contracting by a smaller -3.9% this year, with global activity returning to its pre-virus level by the second half of next year, albeit with the major developed countries likely to take several more quarters to reach the same point. [more]
April 11, 2019
12
This edition reviews recent market moves and outlines Deutsche Bank Research's key views going forward. Read on for our recap of the global macro outlook, key recent/upcoming political developments (Brexit, trade war, EU politics etc.) and major risks in 2019. Also, find our views on the Fed, the ECB, and all major asset classes. [more]
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