Six charts that caught our attention in July

We highlight some of the charts that we found interesting this month, including UK house prices, Chinese trade and the declining dollar.



Investment Communications Team
Investment Communications Team

Feeling confident?

Consumer confidence readings in the UK and eurozone have diverged significantly since the start of this year. Confidence has been on the rise among eurozone consumers as economic data in the single currency area has been encouraging and unemployment is falling. Perhaps most importantly, political risk has eased considerably with Emmanuel Macron’s victory in the French elections.

By contrast, UK consumers have been facing slower nominal wage growth and higher inflation. Meanwhile, the political picture has been muddied by the ruling Conservative Party losing its parliamentary majority after calling a snap general election. And finally, there continues to be considerable uncertainty over how Brexit will play out.

Emma Stevenson


Source: Schroders Economics Group, July 2017.

Safe as houses

In the UK, house price growth began to slow noticeably last year when stamp duty on buy-to-let and second homes increased. The slowdown continued after the announcement that the UK would be leaving the EU. Perhaps surprisingly, London has been hit harder than the rest of the UK.

After the financial crisis, London property prices recovered more sharply than in the rest of the UK. But part of the reason property values in London are higher is due to the city’s status as a global financial hub; somewhat less certain now that Brexit negotiations have begun.

However, there is probably no need to worry yet. Demand still significantly outstrips supply in the UK. Schroders research indicates the country fell some 65,000 houses short in 2016, which should see prices supported.

Andrew Lacey


Source: Schroders Economics Group, July 2017.

Trading up

China’s June trade numbers aptly illustrate that a globally-synchronised recovery is underway, with the country’s exports commonly seen as a barometer of global demand.

Exports to the US, Japan and Europe all accelerated in June (with a particularly strong pickup in the US). Although June exports to emerging markets were marginally softer, the overall growth trend for the global economy is encouraging.

This is because this most recent upturn in Chinese export growth, unlike the post-Global Financial Crisis spike, has not been driven by massive fiscal stimulus programmes or globally loose monetary policies. In fact, it has been quite the opposite. Recent growth has come amid rising interest rates in the US and the possibility of tightening in the eurozone – suggesting demand could be building up genuine momentum.

Timothy Phillips


Is the US energy sector cheap?

The valuation of the US energy sector has been falling. The price-to-book (P/B) ratio used in the chart below compares the sector's share price with the value of its assets (minus its liabilities). If a company has a P/B less than one, it could be undervalued compared to its assets.

With the US oil sector currently valued so cheaply compared to the rest of the market, there may be a temptation to buy in the expectation that oil company share prices will recover. But what would drive such as recovery? Many investors look for an “inflection point”, such as cost-cuts, that could lead to improved returns and a higher share price. Unless such an inflection point can be identified, it could be that oil companies look cheap for good reason.

Emma Stevenson


Temer tantrum tamed

Yields on Brazilian government bonds declined and the real recovered against the US dollar in July. It follows a sharp increase in political risk in May, as allegations of corruption were levelled at President Temer.

The government successfully passed labour reforms, easing concern that support for Temer’s reform agenda had waned. Meanwhile, former President Luiz Inácio Lula da Silva was convicted of corruption, likely prohibiting his participation in 2018 presidential elections. This dims the chances of a return to power for the leftist Workers Party. Further, inflation fell more than forecast to 3%, and the central bank cut rates another 1%.

A congressional vote on whether to send the President’s corruption case to the Supreme Court is expected in early August. Although markets have taken the view that this is unlikely to pass, Brazilian assets may see some volatility as we get closer to the vote. Meanwhile, the outlook for the key pension reform remains uncertain.

Andrew Rymer


Dollar decline gathers pace

The year-to-date decline in the US dollar took on added momentum in late June. Central bank chiefs in the US, UK and Europe each made comments taken as signalling increased hawkishness. Government bond yields were jolted higher, particularly in Europe, and the US dollar hit turbulence (see the chart of the DXY index: measuring the US dollar against a basket of currencies). The greenback’s decline was most pronounced against the euro, which comprises about half of the DXY index, suggesting the market was failing to price the tapering of quantitative easing in Europe.

The past six months had seen a gradual erosion of confidence in the dollar amid a growing disillusionment with the prospect of President Trump enacting his pro-growth policies. July has seen further downward pressure as Federal Reserve Chair Janet Yellen expressed surprise at continued weakness in inflation, which indeed continues to puzzle given employment levels.

James Molony

Source: Bloomberg, July 2017


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.


Investment Communications Team
Investment Communications Team


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

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