Disconnected in a Connected World: Brexit and Beyond Virginie Maisonneuve & Giles Money
In our March article “It is a Long Road to November”we discussed Brexit as a potentially underestimated source of tremors for the markets. Today as markets adjust to the impact of the British referendum, the regularity of small terrorist events and prepare for the next political event in the US, it is important to frame events such as Brexit. Is it a one-off case or does it fit into the growing theme of “Disconnection in a Connected World”?
Fear of “imitation fragmentation” in Europe might galvanize European leaders to come out of their summer blues and actually seize the opportunity to build a stronger, more pragmatic Europe, which would be a positive. .....READ ARTICLE
With the Fed’s official recognition that the path to rate normalization will be slower than they originally put forward, markets have shrugged off their “blues”. A weaker dollar is helping in several ways: commodity prices, a potential (small) support to inflation and emerging markets relief. Beyond this short-term boost, however, there are important milestones to remember on the “long way to November”. These could bring surprises or material events with long lasting impact along the way and more market and currency volatility. This will serve stock pickers who remain focused on quality.
The global economy is in a fragile state. The low-growth/low-rate duo will continue to force structural adjustments that nations are reluctant to consider as necessary or permanent. Those adjustments are taking place at a time of heightened geopolitical volatility, which in itself is partially the result of the ongoing disorder emanating from frictions in the adjustment process. .....READ ARTICLE
2015 will have been an important year for the global markets in several ways. First it marked transitions in key areas such as geopolitics, macroeconomics and liquidity. Second, markets prepared themselves for divergence in monetary policies worldwide. Global markets are slightly down (-0.9%) for the year in US$ with outperformers such as Japan (+8.4%), China (+5.7%) and the US - while emerging markets (-15.1%) and Europe (-2.8%) underperformed.
Looking forward to 2016, what are the key themes for the markets? An important point in our view is the rise of diverging mini-cycles in the global economy, overlaid by several key trends representing potentially strong sentiment influencers such as shifting geopolitics. Clearly liquidity, or shifts in liquidity, will continue to be crucial to asset price performance in 2016. .....READ ARTICLE
It is well known that the Internet of Things (IoT) has revolutionized the consumer sector in major ways. Interestingly, disruptive technologies are also flourishing in the industrial sector and will be transformational over the next decade. This, we believe, will have an impact that is still vastly underestimated by many. The disruption will be felt in Manufacturing but also in Aviation, Oil & Gas, Power, Transportation, Mining and Healthcare. The “Industrial Internet” provides companies that adopt the right platforms and technologies with major profit opportunities by improving asset performance and operational efficiency, generating new service offerings and creating entirely new ways of adding value to customers. .....READ ARTICLE
The science behind climate change is now broadly accepted, and the impact of the increase of global average temperatures, likely to break a one-degree increase this year, must be taken extremely seriously.
The COP21 Climate Conference is a valuable chance for the world to achieve a consensus on a practical framework to address climate change. At a time of relatively intense global political interaction following recent terrorist attacks, and in the context of a difficult environment for decision making in the USA, .....READ ARTICLE
US consumers are important to monitor. Not only is the US the largest world economy, but the contribution of its consumers to the dynamics of the nations prosperity is also very large - at just under 70% of GDP (2014).
At a time of slowing global growth, understanding shifts in US consumption patterns is key. During the period from 1994 to 2014, US personal consumption expenditures have grown to $12 trillion at a 4.6% CAGR. This compares to a global GDP of $77 trillion, growing at 5.3%. US personal consumption expenditure accounts for 15.5% of global GDP.....READ ARTICLE
As we mentioned in our last piece (“Europe: Waiting for Godot?”), Europe is attempting to strike a delicate balance to create sustainable economic growth despite structural headwinds. In addition, multiple divergence themes globally and in Europe in a fragile economic context could possibly hinder its revival.
The attacks on the French capital this weekend can possibly be an additional headwind to economic growth in Europe. Although the full impact is still hard to assess it is fair to say that the potential geopolitical and macroeconomic consequences related to the events should not be ignored....READ ARTICLE
While European exports have shown some signs of revival in the past few months, European manufacturing activity remains muted. Even in Spain or Ireland where growth had been encouraging year-to-date, October did not bode well. Germany and France, unlike the UK, are also under pressure.
The European recovery from the latest financial crisis has been very slow due to a combination of structural and macroeconomic issues. Should investors continue to wait for a meaningful revival in growth in Europe? Or would their hope be in vain, like that of the characters in Becket’s play “Waiting for Godot"? While a new wave of Quantitative Easing could help Europe in the short-term, the global environment could become less supportive...READ ARTICLE
Air pollution is an environmental and a human health issue, which kills more than 7 million people a year. It is a global theme with important ramifications for investors in sectors such as health care, industrials, utilities and consumption. It is also increasingly an issue that politicians must pay attention to. We believe the stakes are such that we are about to see an important wave of related disruptive technology emerge. It will have an impact on global competitiveness...READ ARTICLE