Global
There is little evidence suggesting that declining productivity growth in recent years has resulted from measurement error. Businesses have plucked many of the low-hanging fruits made possible by the IT revolution, while cyclical factors stemming from the Great Recession have also weighed on productivity. Low productivity growth tends to be deflationary in the short run, but inflationary longer-term. For now, this is good news for bonds, but is likely to become bad news by decade-end.
A global comparison suggests that China's capacity utilization does not appear particularly weak compared to other countries. The excess capacity problem is not unique to China, and therefore cannot be explained by China's investment-driven growth model. Chinese stocks have been unduly punished by the "overcapacity" stigma, which is unwarranted and will eventually correct.
We differ markedly with the U.S. EIA's assessment of the near-term evolution of oil supply and demand.
This <i>Special Report</i> reviews all of our active recommendations, including our over/underweight country and asset allocation positions, as well as our current tactical trades.
The benefit of including alternative assets in a traditional portfolio is almost at an all-time high, due mostly to increased return enhancement. This is despite the growing popularity of the alternatives industry and the larger number of entrants, which have reduced alpha opportunities.
The wide WTI - Brent differentials at the front of these respective curves will continue to incentivize crude-oil exports from the U.S. to European refiners, who tend to favor the light-sweet crude coming out of LTO plays.
Expectations of a deepening EM/China growth slump and RMB depreciation have been the key to the selloff in global risk assets. There is no basis for these expectations to improve. Therefore, there are few fundamental reasons for EM and global risk assets to rally much further. Stay put. In Brazil, the impeachment rally is unsustainable and will reverse sooner than later. Stay short Brazilian risk assets.
As confidence in the sustainability of corporate sector profitability declines, the multiple accorded to equities should recede. Ten reasons to stay underweight the tech sector. Initiate an overweight position in gold shares.
Near-term, global yields will remain depressed, but the structural forces suppressing yields should abate and even reverse in the long-run. Slower potential GDP growth - and lower commodity prices - will eventually shift from tailwind to headwind for bonds. Stepped-up efforts to increase inflation will boost long-term nominal yields; populist politics and calls to curb income inequality will amplify this trend. Long-term investors should stay neutral global bonds for now, but prepare to shift to a structural underweight beyond this decade.