Q3 2015

Economic and asset allocation views covering Q3 2015: Looking ahead, we see a pick-up in global activity as the US bounces back from a weak first quarter and growth in Japan and Europe resumes.

13 July 2015

Keith Wade

Keith Wade

Chief Economist & Strategist

What's been happening in global markets?

After a strong first quarter, equity markets took a breather in the second as the action switched to bond markets.

Having fallen to almost zero, German 10-year bond yields rose sharply as evidence of better growth and an end to deflation led many to question the European Central Bank’s (ECB) commitment to quantitative easing.

Mario Draghi has subsequently reassured investors that the programme remains in place and volatility has subsequently subsided.

One factor which will keep the programme in place is the turmoil in Greece where ECB action would be critical in quelling financial market contagion across the region should Greece leave the euro (“Grexit”).

What lies ahead?

Looking ahead, we see a pick-up in global activity as the US bounces back from a weak first quarter and growth in Europe and Japan resumes.

An exit from the euro by Greece, whilst clearly shocking, would put a dent in this, but would not derail the world economy in our view.

At 2% of eurozone GDP, Greece is simply not large enough as an economy whilst there are firewalls in place to prevent significant financial contagion to the rest of Europe and beyond.

The other key feature of the global picture is a lack of recovery in the emerging world with China continuing to struggle, prompting the announcement of further stimulus by the authorities.

Efforts to drive up the equity market and recapitalise large parts of China’s corporate sector have been unravelling as the market has slumped in recent weeks.

How we are positioned?

Our asset allocation remains positive on equities with a focus on Europe where we see better prospects for earnings growth compared to the US, which is showing signs of margin pressure as wage costs rise.

After the general election, the reduction in political risk should boost the UK.

It is too early to go back into the emerging markets particularly with the Federal Reserve likely to tighten policy later in the year and the US dollar expected to remain firm.

The full Global Market Perspective is found below.


  • Currencies
  • Equities
  • Fixed Income
  • Global
  • Economics Team Schroders
  • Keith Wade
  • Inflation
  • Bonds
  • Commodities
  • Foreign Exchange
  • Growth
  • Interest Rates
  • Monetary Policy

Important Information: The views and opinions contained herein are those of Schroders’ Investment team, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  UK: Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA, is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored. Further information about Schroders can be found at www.schroders.com US: Schroder Investment Management North America Inc. is an indirect wholly owned subsidiary of Schroders plc, a SEC registered investment adviser and is registered in Canada in the capacity of Portfolio Manager with the Securities Commission in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan providing asset management products and services to clients in Canada. 875 Third Avenue, New York, NY, 10022, (212) 641-3800. www.schroders.com/us