The stars were perfectly aligned for the financial markets in 2017. Strong and synchronous growth around the globe, no signs of inflation, still accommodative monetary policies, few geopolitical events impacting the economy, and strong corporate earnings all made for a solid year.
Donald Trump’s announced sanctions on Iran are proving to be quite a headache for European companies that had re-expanded their business in the market since the July 2015 agreement.
In any European country whose public finances are fragile, a government elected on the promise of fiscal easing has every chance of finding its path blocked by the censors of Brussels and Berlin. This leaves two possibilities.
On April 27, North and South Korea brokered peace talks in a joint summit, the first of its kind in more than a decade.
The appointments of Pompeo and Bolton have made a lenient stance on the Iran regime inconceivable.
The Federal Reserve is likely to keep hiking interest rates – including at its next June meeting – and the latest labour market report is in line with this view.
The protectionist issue has not gone away and will probably be with us for some time, but the time has come for talks between the US, China and the European Union, as well as with Mexico and Canada over NAFTA.
With economic data being on the weaker side, and surveys not suggesting any imminent improvement, we think that the Bank of England is likely to remain prudent and abstain from raising the Bank rate at this month’s meeting.
Latest inflation figures for March suggest that inflation has peaked earlier this year, and is likely to stabilize at current, low levels.
This simple graph from the Wall Street Journal is just a measure of the constraints that have been imposed to Greece since the beginning of their adjustment. The US depression is just small potatoes compared to Greece.