Economic and Strategy Viewpoint - May 2017

In this month's update we ask whether the dollar has turned, look at whether the UK's snap election offers hope for a softer Brexit, and see a case of déjà vu in South Africa.

05-12-2017
Wordle-May-2017
Read full reportEconomic and strategy Viewpoint May 2017_ Final
0 pages333 KB

Has the dollar turned? (page 2)

  • President Trump has appeared to ditch the administration’s traditional strong dollar policy by complaining about the adverse impact of the currency. The dollar is strong and we find that it is dragging on US activity, suggesting that the president is right, but will a weaker dollar follow particularly when the Federal Reserve is tightening monetary policy?
  • Rate hikes in the US support the currency, but the relationship with Fed tightening cycles is mixed and there is evidence that the dollar has overshot. The path is open to a weaker dollar which may be problematic for the European Central Bank and Bank of Japan, but will come as a relief to emerging markets.

UK: Snap election offers hope for a softer Brexit (page 6)

  • Prime Minister Theresa May’s surprise announcement that there will be an election on 8 June has been cheered by investors, pushing sterling higher against the US dollar. The election is likely to give May a larger majority, and more power to ignore those calling for a “harder” Brexit.
  • Meanwhile, the household sector is starting to feel the pinch. The savings rate has hit a record low and retail sales have fallen sharply. The economy is on the verge of slowing, making holding the election more urgent for the government.

Déjà vu in South Africa (page 11)

  • Determined not to learn from past mistakes, South African President Zuma has sacked another well regarded finance minister. The resulting political noise will likely weigh on growth in an economy already struggling to generate momentum.

Views at a glance (page 14)

  • A short summary of our main macro views and where we see the risks to the world economy.

The full Viewpoint is available as a pdf below.

Read full reportEconomic and strategy Viewpoint May 2017_ Final
0 pages333 KB

Subscribe to our Insights

Visit our preference center, where you can choose which Schroders Insights you would like to receive

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.

Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit www.schroderscapital.com

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.