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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 about "International"

145 (61-72)
February 7, 2018
61
After a stellar 2017 and an even stronger January, risk assets have undergone a sharp pullback in the last week. Initially triggered by higher rates as markets repriced inflation expectations higher, the episode evolved into a technical spout of volatility exacerbated by programmatic strategies. The pullback is healthy, after a highly unusual stretch of market tranquility. [more]
January 25, 2018
62
The lead market commentator of the Financial Times this morning writes that the dollar sell-off has “stopped making sense”. Indeed, viewed with the post-crisis lens of activist central banks and exceptionally tight correlations between FX and rates the dollar is entirely out of line with fundamentals. But currency moves over the medium-term ultimately boil down to one thing: flows. If inflows into an economy pick up the currency strengthens and vice versa. Looked at from a flow perspective, the dollar bear market makes complete sense: our outlook for FX 2018 argued that the flow picture is exceptionally supportive for EUR/USD and this positive dynamic is currently playing out. [more]
January 23, 2018
63
This edition reviews the global macro outlook, with 2018 likely marking the peak of the current cyclical expansion. Read on for our views on the US macro outlook and the Fed, the eurozone and the ECB, China’s macro outlook and risks. Find also a summary of our views on key themes as well as on the different asset classes and the main macro and markets forecasts [more]
January 15, 2018
64
Against expectations, economies and markets powered ahead in 2017. Many predict more records to be broken in 2018. Yet, in many sectors, things are more complicated and 2018 may be the year of tipping points that augur unexpected change – both positive and negative. In this issue, we probe these tipping points and analyse the effects on economies and industries that investors may have ignored. [more]
December 11, 2017
65
Happy holidays. This is what market sentiment feels like at the moment, with risk assets at or close to multi-year highs. Faster progress on tax reform bills in the US and the EU-UK exit deal provided the last positive catalysts. They add to a favourable backdrop of strong economic growth, increasingly supportive fiscal and regulatory policy, and tightening but still easy monetary policy. [more]
November 15, 2017
66
The euro’s second place among the world’s most important reserve currencies has remained so far undisputed. The single currency’s share of allocated foreign exchange reserves stabilised at 19.9% in Q2, according to IMF data. The US dollar easily defended its position as the dominant currency in the international monetary system. But both the euro and the dollar gradually gave some way to other reserve currencies. Regardless of whether this observation reflects structural developments or rather (temporary) shifts in reserve allocation - it certainly fuels the discussion about the 21st century’s leading reserve currency (or currencies). [more]
October 2, 2017
67
Welcome to the eleventh edition of Konzept, Deutsche Bank’s flagship research magazine, which coincides with memories of the first stirrings of the financial crisis entering their eleventh year. This issue is published as the Federal Reserve starts rolling back quantitative easing, symbolising the post-crisis era giving way to the post-QE world. [more]
September 18, 2017
68
Unlike the last few years, this summer was relatively quiet. As markets look ahead to the rest of the year, the key theme will continue to be the major central banks’ tentative progress toward removing monetary accommodation. Investors have so far not priced in this outlook. Since the prospects for growth across all the major countries is better than it has been for some time it remains a puzzle why there hasn't been a greater sell-off in bond markets. [more]
August 10, 2017
Analyst:
69
Robo-advisors are online investment platforms that use computer algorithms to manage client portfolios and are thus part of the FinTech universe. With their user-friendly, automated and low-cost services, robo-advisors pose a challenge to traditional financial advisory services and are growing fast. Online client onboarding is the most crucial step in this process, relying on questionnaires to figure out clients' preferences. Following a conservative approach in their asset selection, robo-advisors mainly invest in ETFs. Portfolio allocation is done via mean-variance optimisation and threshold-based rebalancing is utilised to maintain targeted asset weights. Wealthier and more educated clients are joining millennials as robo-advisory clients. Fees are considerably higher in the EU than in the US where robo-advisors’ AuM are much larger. Robo-advisors can contribute to financial inclusion, while their long-term success relies on a high degree of accuracy and suitability for clients. [more]
June 22, 2017
Analyst:
70
With the growing use of digital payments, the need for physical cash is no longer self-evident. But: Demand for euro cash is on the rise. Euro cash in circulation tripled between 2003 and 2016 to EUR 1.2 trillion and thus, grew faster than GDP at current prices. It is estimated that euro cash is used for domestic payments, hoarded for saving purposes and held outside the euro area at roughly equal parts. [more]
May 5, 2017
71
Growth in global trade almost stagnated at just 1.3% in 2016, and in some months was even negative. During winter, global trade picked up again, rising by around 3% compared to the same period a year earlier. Given the positive sentiment prevailing across the globe, this rebound could well continue. However, this trend is not yet being fully reflected in other hard economic indicators, usually highly correlated with global trade, and sentiment may therefore overstate the actual trend a little. Still, our simple model of world trade, which suggests moderate growth of just over 2% in 2017 and around 3% in 2018 might represent the lower limit of the forecast range. However, compared to previous cycles the upturn could remain weak, not least because of the global trade restrictions that have been progressively ratcheted up since 2008. [more]
April 25, 2017
Analyst:
72
Politics remain a key focus for markets, but the latest developments in Europe are positive. In France, the first round of the presidential election ruled out the least market-friendly ‎outcome, and although eurosceptic Marine Le Pen is in the run-off as expected, polls suggest reformist Macron should win. The snap election called in Britain for June is a material positive game-changer for Brexit negotiations. [more]
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