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The Long Run

Long Run Update

Long Run Update

Productivity in the pandemic

It is still too early to assess the lasting impact of the pandemic on productivity in developed economies. But we remain optimistic that the legacy could be a positive one.

24 June 2022

Long Run Update

US equity valuations still much higher than elsewhere

Despite the sharp fall in the US stock market this year so far, US equities still appear much more highly valued than their peers in the rest of the world. While that might not tell us much about the outlook for relative returns in the near term, comparatively high valuations in the US are perhaps a reason to suspect that the stock market in the US will underperform those elsewhere over the longer term. In view of the wider interest, we are also sending this Asset Allocation Update to clients of our Long Run Service.

10 June 2022

Long Run Update

Are the demographic headwinds strengthening?

A falling fertility rate and declining employment among retirement age workers pose downside risks to our long-term forecasts for Japan’s labour force and GDP growth. However, with the female participation rate still climbing from record highs and job openings for older people set to pick up as the economy shakes off the pandemic, we’re sticking to our forecast of (only) a 17% fall in the labour force by 2050.

7 June 2022
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Long Run Update

Higher inflation chipping away at public debt ratios

One benefit of the current rise in inflation, at least for governments, is that it is eroding the real value of public sector debt. But this will reverse only a small part of the pandemic-related rise in government debt ratios in DMs. And the impact on government borrowing is less helpful; indeed, higher inflation will have an increasingly adverse impact on governments’ debt servicing costs as interest rates and bond yields rise. In view of the subject relevance, we are also sending this Global Economics Update to clients of The Long Run. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

Long Run Update

Which COVID-behavioural changes are permanent?

We argued two years ago that the pandemic would accelerate changes that were already underway rather than trigger behavioural changes out of the blue. Now that most restrictions have been removed in advanced economies, spending on services and recreation are recovering quickly as we expected. The shift to hybrid working seems set to persist, but there is little evidence that this has affected productivity growth in either direction so far.

Long Run Update

Revisiting the case for Japanese equities

The valuations of mid- and large-cap equities in Japan have become even more attractive compared to those of their US counterparts following a further period of substantial underperformance in common-currency terms. That may bode well for their relative performance, at least in the long run. In view of the wider interest, we are also sending this Asset Allocation Update to clients of our Long Run Service.

Long Run Update

The long-run effect of the Ukrainian refugee crisis

The main long-run economic impact of the Ukrainian refugee crisis will be to boost the workforce of countries where the migrants settle, partially offsetting the unfavourable demographics that many of these areas face.

Long Run Update

The dollar won’t be toppled

Claims that the war in Ukraine will prove to be a watershed moment that ends the dollar’s position at the heart of the global financial system are wide of the mark. It could accelerate the development of smaller trading blocs that use alternative currencies, but these won’t rival the scale and reach of the dollar. In view of the wider interest, we are also making this Long Run Update available to clients of our FX Markets & Global Economics Services.

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