Andrew Hunter, our US Economist discusses the following:
- Can the recent upturn in growth be sustained?
- Will tax cuts help?
- Will inflation remain so subdued?
- How will the Fed respond?
Jessica Hinds, our European Economist, discusses the following:
- How sustainable is the euro-zone’s economic recovery?
- Does the inflation outlook justify policy normalisation?
- What impact will ECB tapering have on the economy?
Mark Williams, our Chief Asia Economist, discusses the following:
- What lies behind the strong recent growth performance?
- Has Abenomics lifted the threat of deflation?
- Is there any prospect of the Bank of Japan normalising policy?
John Higgins, our Chief Markets Economist, discusses the following:
- A re-cap of the economic and policy outlook.
- What are the market implications?
- Currencies
- Bonds
- Equities
At our Developed Markets Forecast Forum in December 2017 we argued that the near-term outlook for major economies was still positive, but that clouds lay on the horizon, particularly for financial markets. In the US, strong economic growth still appears to have some momentum, with tax cuts likely to give a small fiscal boost in 2018. But we expect interest rates to rise at a relatively rapid rate as capacity constraints bite and growth is likely to slow as a result further ahead. The recovery in the euro-zone has much further to run and the economy and banking system looks well placed to withstand tightening by the ECB. In Japan, meanwhile, record low unemployment points to Abenomics’ success in generating growth. But with inflation and wage growth barely positive, the Bank of Japan still seems destined to keep monetary policy ultra-loose for the foreseeable future. All this adds up to a relatively benign environment for financial markets, with rate divergences likely to boost the dollar in 2018 and no major worries about valuations likely to upset equity markets. Instead, we think that growing evidence that the US recovery is running out of steam will be the development that brings the positive mood in financial markets to an end.
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