Schroders senior economists look at whether or not low interest rates are a sign of secular stagnation, if political paralysis in the UK will slow austerity, and the state of trading conditions in emerging markets. The infographic summarizes the main document.
31 March 2015
Schroders economic and strategy outlook
Global: Are low interest rates a sign of secular stagnation? (page 2)
- Interest rates have fallen further with 21 central banks cutting policy rates this year whilst global liquidity continues to weigh on longer-term rates. However, despite six years of zero rates, global growth remains tepid and there are fears we are in a period of secular stagnation where the world will struggle with a chronic deficiency of demand. We have some sympathy for this view and recognise the risks, but ultimately see it as too pessimistic.
- The combination of a dovish outlook by the Federal Reserve and the strength of the dollar has caused us to push our first forecast for the rate rise out to September 2015 from June.
UK: Political paralysis to slow austerity (page 6)
- The general election in May is set to be one of the most unpredictable elections in the UK's history as smaller parties capitalise on voters' disenchantment with the mainstream parties. Political paralysis may ensue, which is likely to disrupt the UK's progress in cutting its fiscal deficit. This is good news in the near-term, but over the medium-term will crowd out private investment, and may cause the already record current account deficit to expand further. Yet another reason to sell sterling.
EM: Are exports emerging? (page 11)
- A year of growth in the US and signs that the Eurozone may be turning the corner prompt a re-examination of export data in emerging markets. We could be in line for some isolated pockets of trade recovery this year.
Views at a glance (page 15)
- A short summary of our main macro views and where we see the risks to the world economy.
The full Viewpoint is available at the link below.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, 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. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.