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ハイライト ECBのテーパリング？：ECBがカナダ銀行やイングランド銀行に続き、予想より早く国債買入を縮小し始める—ひょっとすると来月の政策会合で—かもしれないという投資家の懸念は的外れです。ECBが最も避けたいのは、欧州の成長とインフレの加速を先取りして金融緩和の縮小に踏み切った結果としてユーロ高とイタリア国債利回りの急騰を招くことです。 ユーロ圏債券ストラテジー：我々は現在の欧州債券に関する推奨を維持します：グローバル債券ポートフォリオ内で欧州をオーバーウェイトとし、コア国の国債に対してペリフェラル（周辺国）ソブリンおよびコーポレートを優先する一方、ブレークイーブンが割安なフランス、イタリア、ドイツのインフレ連動債もオーバーウェイトとします。また、ECBの利上げ織り込みを織り戻す新たな戦術取引として、2023年12月ユーロイボー金利先物（3か月）ロングを提案します。 特集 親愛なる顧客の皆様へ、 来週、月刊のバンク・クレジット・アナリスト誌の同僚と共同で、現在の世界的な住宅ブームが投資に与える影響についてのスペシャルレポートを発表します。そのレポートは5月28日金曜日にお届けします。通常の週次発行スケジュールには6月1日火曜日に戻ります。 - Rob Robis 今週のチャート 欧州債利回りの期待外れの上昇 欧州債券利回りの期待外れの上昇 欧州債券利回りの期待外れの上昇 来月の金融政策会合に向けて、欧州中央銀行（ECB）総裁のクリスティーヌ・ラガルドは、パンデミック開始以来初めて理事会メンバーを対面で招集する予定だと伝えられています。これは、ワクチン接種が進んでCOVID-19の深刻な局面から脱しつつある欧州に対して、どの程度の金融支援がまだ必要かを巡る議論が行われるであろう会合において興味深い副次的要素を提供します。先の4月のECB会合の議事要旨によれば、既に一部のECB関係者は経済成長とインフレ期待のリスクが「上振れに傾いている」と指摘しています。 欧州の景況感が改善する中、欧州の債券利回りは反応して上昇しています（今週のチャート）。ベンチマークである10年ドイツ国債利回りは現在-0.11%で、年初来46bp上昇しましたが、その半分は過去１か月での動きです。利回りの上昇はドイツやフランスといったコア国に限定されたものではなく、10年イタリア国債利回りは現在1.11%に達し、2021年初めの水準（0.52%）の倍以上になっています。インフレ期待も急速に高まっており、5年先5年物フォワードのユーロ消費者物価指数スワップは現在1.63%で、2018年12月以来の水準です。 これらの利回り上昇は他国で見られる大きな上昇に比べると遅れています。米国とカナダの10年国債利回りは年初来それぞれ72bp、90bpの上昇を記録しています。これらの国々で利回りが急騰したのは、インフレ期待の上昇と中央銀行の国債買入縮小（テーパリング）への懸念が原因であり、カナダについては先月、実際にカナダ銀行が国債買入ペースの減速を発表して的中しました。 我々の見解では、ECBがよりタカ派的な政策スタンスへの転換を検討するにはまだ時期尚早です。この見解は、上昇したものの依然としてより引き締めを示唆していない我々のECBモニターによって裏付けられます。欧州の債券売りは「過剰で、速すぎる」ケースに見えます。 ECBは今や多くの課題を抱えている 最近のユーロ圏の経済指標は、米国で先行して見られた強さに追いついただけでなく、場合によっては長年見られなかった水準に戻っています。ドイツのZEW景気期待指数の期待項目は5月に約14ポイント急上昇し、2000年以来の水準に達しました。製造業のMarkit PMIは4月に過去最高の62.9に達しました。欧州委員会のユーロ圏消費者信頼感指数はほぼパンデミック前の水準に戻っており（チャート2）、サービス業のMarkit PMIの回復継続に良い前兆です。 パンデミックに関する良いニュースが成長見通しの急伸を後押ししています。新規COVID-19感染者の増加ペースは着実に低下しており、パンデミック初期に最も深刻な被害を受けた地域の一つであるイタリアでは現在（7日移動平均）10月以来で最も低い新規感染率を示しています。一方で、ワクチン接種のペースは当初の遅い立ち上がりから加速しており、1日あたりの接種回数（100人当たり）はドイツ、フランス、イタリアで米国を上回っています（チャート3）。 チャート2 欧州の成長は回復中 欧州の成長は回復している 欧州の成長は回復している チャート3 欧州での接種加速 欧州におけるワクチン接種の加速 欧州におけるワクチン接種の加速 チャート4 欧州の余剰生産能力はどの程度か？ 欧州にはどれだけの余剰生産能力があるのか？ 欧州にはどれだけの余剰生産能力があるのか？ 接種の急速な進展は、2020年Q4と2021年Q1のロックダウンによる二番底型リセッションからの確かな回復を欧州にもたらす見込みです。欧州委員会は先週、ユーロ圏の成長見通しを上方修正し、実質GDPは2021年に4.3%、2022年に4.4%の拡大を見込むとしました（従来見通しは両年とも3.8%）。NGEU（ネクスト・ジェネレーションEU）パッケージを通じた公共投資の回復が夏の後半に資金支出を始めることで、全てのユーロ圏諸国は2022年末までにパンデミック前の生産水準に回帰する見込みです。 ECBは6月の会合で、自らの経済成長およびインフレ見通しを引き上げることは確実でしょう。後者の見通しは、ECBの理事会内で最大の議論材料になる可能性が高いです。 製造業PMIのような調査ベースの指標が比較的協調的に回復しているにもかかわらず、失業率や一般的な余剰生産能力の指標にはユーロ圏内で大きなばらつきが残っています（チャート4）。これは、ヘッドラインHICPインフレ率の年次増加率が多くのユーロ圏国で約2%に近づいている一方で、イタリアやスペインのように依然として非常に高い失業率に苦しむ国々があるため、ECBがこの実現インフレの上昇が持続するかを判断するのを難しくします。 ユーロ圏内の失業率の広い分布は、現行の政策金利水準（0%前後かそれ以下）が適切であることも示唆しています。ヨーロッパの労働市場の強さの「幅」を測る単純な指標の一つは、OECDが推定する完全雇用のNAIRU以下の失業率を有するユーロ圏国の割合を見ることです。1 この指標は、基本的なテイラールールにより算出されるユーロ圏短期金利の適正水準の推定と良く相関します。現時点では、ユーロ圏諸国のうち完全雇用を超えているのはわずか43%であり、これはECBの政策金利がおおむね0%付近である状況と整合します（チャート5）。 チャート5 政策金利が0%付近であるのが依然適切 政策金利が0％近辺でも依然として適切である 政策金利が0％近辺でも依然として適切である やや多めの国（47%）は賃金上昇の加速を見ています（下段）。これは、一部の国のNAIRU推定が低すぎる可能性があり、2015年以降のユーロ圏全体の賃金上昇加速と整合します。しかし、多くのユーロ圏国がパンデミックで増加した失業の処理途上にあることを踏まえると、ECBが労働市場の動態を十分に把握し、必要な金融政策の調整を決めるまでには時間がかかるでしょう。 データトレンドの「幅」はテイラールールのような理論的な金利指標とだけ相関するわけではありません。実際のECBの政策決定は、高い成長とインフレがユーロ圏全域にどの程度広がっているかによって動機付けられます。 チャート6では、チャート5の労働市場の幅指標と類似の指標を、他の経済・インフレデータを用いて示しています。具体的には、以下を観察するユーロ圏各国の割合を示しています： チャート6 ECBは成長とインフレが広範に及ぶときに引き締める傾向 成長かつインフレが広範に及ぶとき、ECBは通常、金融政策を引き締める 成長かつインフレが広範に及ぶとき、ECBは通常、金融政策を引き締める a) OECD景気先行指数が1年前の水準より高く、成長モメンタムが加速していること； b) ヘッドラインHICPインフレの最新値が1年前と比べて上昇しており、インフレモメンタムが加速していること； c) ヘッドラインHICPインフレがECBの「ほぼ2%未満」目標を上回っており、比較的高いインフレであること。 1998年のユーロ導入以降の過去のECBの金融引き締め局面（実際の政策金利の引上げ、あるいはECBのバランスシートの横ばい～縮小トレンドの形をとったもの）をすべて見ると、ECBは少なくともユーロ圏国の75%が成長とインフレの両方で加速していない限り引き締めに踏み切らないことが明らかです。実際の利上げは、2000年、2005～2007年、2011年の利上げサイクルのように、少なくとも75%の国でインフレ率が2%を超えていたときに発生しました。より最近では、2017年にECBは成長とインフレが加速した際にバランスシートの拡大を停止しましたが、インフレが2%を超える国が50%にとどまったため、政策金利の調整は行いませんでした。 今日、実質的に全てのユーロ圏国がパンデミックで落ち込んだ1年前の水準と比べて成長モメンタムが加速しています。ユーロ圏の59%の国でインフレが加速しており、この数字は欧州のさらなるロックダウン解除と世界的なコモディティ価格の上昇に伴いさらに上昇する可能性があります。しかし、ヘッドラインインフレが2%を超える国はわずか12%にとどまっており、2017年の経験に照らすと、実現インフレはECBのバランスシート調整を引き起こすほど強くはありません。 6月のECBテーパリングに賭けるな 過去のECBの行動から判断すると、6月の政策会合で国債買入のテーパリングを発表するのは時期尚早です。より可能性が高いのは、ECBの成長・インフレ見通しの上方修正がきっかけとなり、量的緩和、TLTROのような銀行向け資金供給プログラム、政策金利といったECBの金融刺激策の各要素をどう扱うかという議論が始まることです。しかし、ECBが方針の次の一手を決定するには、インフレ目標自体の性質がまもなく変わる可能性があるため、6月会合で結論に達するのは不可能でしょう。 ECBは現在、2003年以来初となる金融政策ストラテジーのレビューを行っており、今年後半に完了する予定です。インフレ目標にはある程度の柔軟性を持たせる調整が予想されますが、その具体的な内容はまだ不明です。ECBが連邦準備制度（Fed）の先例に倣い「平均インフレ目標」政策へ移行し、目標を下回る期間の後にインフレ目標の超過を許容する可能性はあるのでしょうか？ ECBのチーフエコノミストであるフィリップ・レーンは3月に、FRBの新たなアプローチには「非常に強い論理性がある」と述べています。同時に、いくつかの欧州諸国における「非常に異なるインフレの歴史」が、一時的に高めのインフレを許容するような制度について合意に達することを難しくする可能性があるとも指摘しました。2 より最近では、フィンランド中央銀行総裁であり理事会の穏健派メンバーで現在のECB総裁候補とも見なされたオッリ・レーンが、5月9日のフィナンシャル・タイムズのインタビューでECBが米国型の平均インフレ目標へ移行することを支持すると述べました。3 レーンは、失業を最小化することに重きを置く米国型の焦点は「より低い自然利子率という現状では理にかなっている」と述べ、ECBの現在のインフレ目標の文言は「非対称性の認識を生んでおり、『2%が上限である』と見なされてインフレ期待を抑制している」と説明しました。 我々は、ドイツ連銀のイェンス・ヴァイトマンが、ECBのインフレ目標を2%超の一時的な上振れを容認するように変更することに激しく反対するだろうと想像します。ドイツのヘッドラインHICPインフレは既に4月に2.1%に達しており、ドイツ経済の長期にわたるロックダウン解除に伴いさらに上昇する可能性があります。しかし、たとえヴァイトマンが「緩和」のいかなる動きにも強硬に反対しないとしても、ECBのストラテジーレビューの完了が近づいていることを考えると、テーパリングのような政策変更がそれ以前に信頼性を持って発表される可能性は非常に低いでしょう。もし高めのインフレが容認されるなら、そもそもなぜテーパリングを行う必要があるのでしょうか？ インフレ戦略レビューを越えて見れば、ECBが次の金融政策の一手を検討する際に重荷となり得る他の要因もあります： 中国の政策引き締め：欧州の最大の貿易相手である中国は、2020年にパンデミック対応で成長を支えるために許容した借入の急増後、信用成長や財政支出を抑制し始めています。我々の中国クレジット・インパルス指標は、欧州から中国への輸出の年次成長率を約9か月先行しており（チャート7）、今年後半に輸出の劇的な減速を示唆しています。これは特にドイツのように中国向け輸出依存度が高い国々にとってユーロ圏成長の下振れリスクとなります。 貸出成長の鈍化：ユーロ圏全体の銀行貸出の年次成長率は2月に12.2%でピークを迎え、現在は10.9%に低下しています（チャート8）。軟化の多くはドイツとフランスで発生しており、これらの国はECBのTLTROを通じた優遇銀行資金の大幅な活用を見ていました。最新のTLTROプログラムのためにECBが設定した価格面でのインセンティブは非常に魅力的であり、ドイツとフランスの銀行は安い資金を利用して貸出を拡大したようです。これは銀行貸出データの経済的解釈をECBにとってより難しくしており、特にイタリアの貸出成長とTLTRO利用が現在加速している点がそれに拍車をかけています。 チャート7 欧州の輸出需要に対する警告サイン 欧州の輸出需要の警戒サイン 欧州の輸出需要の警戒サイン チャート8 ECBのTLTROはイタリア重視に ECBのLTROがイタリアに焦点を当てつつある ECBのLTROがイタリアに焦点を当てつつある NGEU支出：前述の通り、€7,500億のNGEU（ネクスト・ジェネレーションEU、別名「リカバリー・ファンド」）からの支払いは、各国の政府投資提案がEUの承認を得れば今年後半に開始される見込みです。NGEU資金はデジタルやグリーン関連の投資など、将来の経済成長を押し上げるイニシアティブを資金供給することを目的としています。多くのユーロ圏国がすでに提案を提出しており、イタリアは€1,920億の要求で主導しています。 チャート9 NGEUは今後5年間で欧州成長に大きく寄与する ECBの見通し：卵の殻の上を歩く ECBの見通し：卵の殻の上を歩く チャート10 NGEUの影響は前倒しで現れる NGEUの影響は前倒しで現れる NGEUの影響は前倒しで現れる S&Pグローバルの最近の研究は、NGEU投資によりユーロ圏全体の成長が2021年から2026年にかけて累積で1.3～3.9ポイント押し上げられる可能性があると結論づけています（チャート9）。4 同研究はまた、支出の影響は次の2年間に前倒しで現れるだろうと指摘しています（チャート10）。イタリア政府はNGEU投資がイタリアの低迷するトレンド成長率を1.5%まで倍増させる可能性があると考えています。多くのECB関係者は、NGEUのような構造的財政刺激があれば極めて緩和的な金融政策を維持する必要性が低くなると指摘しています。しかし、NGEU提案が最終化され、承認された資金額が配分されるまでは、ECBは政府投資を考慮に入れた経済予測を調整することができません。 これらの即時的な不確実性、特に欧州がパンデミックのロックダウンからどれだけうまく再開できるかを含め、我々はECB理事会が6月の政策会合で現行の金融政策ツールやガイダンスの即時変更が必要だと結論付けるという筋の通ったシナリオは見ていません。 結論：ECBがカナダ銀行やイングランド銀行に続いて予想より早く国債買入を縮小し始める—ひょっとすると来月の政策会合で—という投資家の懸念は的外れです。 ECBの次の可能性のある動きと投資への影響 6月にテーパリング発表があるとは考えにくい一方で、将来の動きに向けた示唆が出る可能性は十分あります。ECBは政策転換のかなり前から市場を準備させることで悪名高く、したがって6月会合後の公式声明やラガルド総裁の記者会見には、ECBの次の動きに関する手がかりが含まれる可能性があります。 チャート11 ECBの緩和は多様な形態をとる ECBの金融緩和は様々な形を取る ECBの金融緩和は様々な形を取る 来年3月に終了予定のパンデミック緊急購入プログラム（PEPP）についての議論が6月に持ち上がる可能性はあります。欧州経済の再開の成功やNGEU資金の最終承認額がより明確になる9月の政策会合で取り上げられる可能性の方が高いと考えられます。これらが、COVID-19ショックに起因して導入された資産買入プログラムを維持する必要性を決定づけるからです。 緩和を段階的に縮小する際にECBが選択できる政策オプションは多岐にわたります。 調整可能な政策金利は複数あります。ECBが次に利上げを試みる際、最初に動く金利はおそらく短期金利の「下限」を示す預金金利（現在-0.5%）になるでしょう（チャート11）。 ただし、利上げはバランスシート関連ツールの縮小・巻き戻しの前には発生しないでしょう。つまり、まず資産買入が縮小されます。市場参加者はその政策選択の順序を良く認識しており、短期金利の非常にフラットな経路が欧州のOISカーブに織り込まれています。 OISとCPIスワップ曲線のフォワードレートのスプレッドは、市場の実質金利のフォワード価格付けの代理として使えます。現状、市場が示唆する実質ECB政策金利は今後10年で-2%から-1%の間にとどまると織り込まれています（チャート12）。言い換えれば、市場は今後10年間で予想インフレを上回らない非常にフラットなECB政策金利の経路を織り込んでいます。 欧州の自然実質利子率はトレンド成長が低いため非常に低い可能性がありますが、実質金利が-2%といった水準にあるということは、欧州経済に関する多くの悪い構造的ニュースを織り込んでいることを意味します。比較すると、NY連銀がパンデミック前の2020年第2四半期に算出した欧州の自然実質利子率（r-star）は+0.6%とプラスでした。 このように実質金利のマイナス期待が長期化すると、ベンチマークであるドイツ国債利回り曲線上に実質的にマイナスの実質利回りが持続することの説明がつきます。単純に言えば、ECBが本格的な利上げサイクルを演出できると信じられていないのです—これは日本のフィクスト・インカム投資家には馴染みのある結果です。 ECBがユーロの水準を常に懸念しており、それが欧州の成長とインフレ期待に影響する役割を果たすことを考えると、市場がECBにとって金利を大きく引き上げるのは通貨高を招きかねず難しいと考えるのは正しいでしょう。ECBが2014年にマイナス金利政策に移行して以来、購買力平価（PPP）ベースで一貫してユーロが過小評価されてきたのは偶然ではありません（チャート13）。 チャート12 市場は今後10年の欧州実質金利のマイナスを予想 市場は今後10年間、欧州の実質金利がマイナスになると予想している 市場は今後10年間、欧州の実質金利がマイナスになると予想している 先を見れば、ECBは市場に対して金利の将来経路を上方修正させユーロを大幅に押し上げるような政策変更（テーパリングを含む）を示唆する際には慎重である必要があります。 チャート13 低いECB金利がユーロの過小評価を維持 低いECB金利がユーロの割安感を維持している 低いECB金利がユーロの割安感を維持している つまり、欧州の実質債利回りは少なくとも2021年後半にかけて深くマイナスのままである可能性が高く、名目利回りの追加上昇は主にインフレ期待の上昇によることになります（チャート14）。これにより、現在水準から欧州債利回りがさらに上昇できる余地は限定されます。 チャート14 欧州債券ストラテジーの要約 欧州債券ストラテジー概要 欧州債券ストラテジー概要 我々は引き続き、コア欧州債利回りは少なくとも2021年後半は米国債利回りに対して「低いイールドベータ」で推移すると考えており、2022年にフェデラル・リザーブが国債買入のテーパリングを開始すると予想しています。したがって、グローバル債券ポートフォリオではコア欧州国債を米国債に対して戦略的にオーバーウェイトするという推奨を維持します。米国でのテーパリングの発生確率が欧州より高く、その後の利上げもECBよりFRBの方が実施する可能性が高いと見ているからです。 専用の欧州債券ポートフォリオ内では依然としてベンチマークよりやや短めのデュレーションを推奨しますが、もし10年ドイツ国債利回りが大きくプラス領域に上昇した場合には、欧州のデュレーションエクスポージャーを引き上げることを検討します。 我々はまた、ドイツ、フランス、イタリアのブレークイーブンが我々のグローバル評価モデル群で唯一割安であるため、欧州のインフレ連動債に対するオーバーウェイト推奨を維持します。 欧州のクレジットでは、スプレッド商品をソブリン債に対してオーバーウェイトすることを引き続き推奨します。これはイタリアやスペインの国債だけでなく、投資適格およびハイイールドのコーポレート債を含みます。これらの市場に対してより弱気になるべきタイミングは、ECBが資産買入をテーパリングし始めた時です。クレジットスプレッドはECBのバランスシートの成長が鈍化している期間に拡大する傾向があります（チャート15）。 ECBが最終的にテーパリングを決定した際には、TLTROのネット残高は現在水準近くで維持される可能性が高いと考えています（満期を迎えるものを置き換える新たなTLTROを導入することで）。これにより、イタリアのような脆弱な国々でECBのイタリア国債買入減少と安価なECB資金へのアクセス減少という二重の打撃で借入コストが急騰する事態を避けることができます。 最後に一言—我々は今週、戦術的オーバーレイ・ポートフォリオの第19ページで、市場がよりタカ派なECB見通しを織り込むのを織り戻すための新たなトレードを導入します。最初のECBによる利上げの最も可能性の高い規模は10bpであり、これはOISカーブで2023年中頃に織り込まれています。2023年末までにはフォワードレート曲線でほぼ25bpの利上げが織り込まれています。我々はECBが2023年に利上げするとは予想していませんが、たとえ利上げがあっても、6か月以内に累積で25bpの利上げが実現する可能性は低いと考えます。したがって、エントリープライス100.27で2023年12月限の3か月ユーロイボー金利先物ロングを推奨します（チャート16）。 チャート15 ECBのテーパリングは欧州クレジットにとって悪材料 ECBのテーパリングは欧州クレジットにとって悪いニュースになるだろう ECBのテーパリングは欧州クレジットにとって悪いニュースになるだろう チャート16 2023年12月ユーロイボー先物をロング 2023年12月限ユーロイボー・フューチャーズをロングする 2023年12月限ユーロイボー・フューチャーズをロングする 結論：ECBが最も避けたいのは、欧州の成長とインフレの加速に事前対応して金融緩和を縮小し始めた結果として必然的に生じるユーロ高とイタリア国債利回りの急騰です。我々は現在の欧州債券に関する推奨を維持します：グローバル債券ポートフォリオ内で欧州をオーバーウェイトとし、コア国の政府債に対してペリフェラルのソブリンおよびコーポレートを優先するとともに、ブレークイーブンが割安なフランス、イタリア、ドイツのインフレ連動債もオーバーウェイトとします。   Robert Robis, CFA チーフ・フィクスト・インカム・ストラテジスト rrobis@bcaresearch.com 脚注 1 NAIRUは失業率の非加速的インフレ率（Non-Accelerating Inflation Rate of Unemployment）の略称です。 2 レーンのコメントは、2021年3月16日にフィナンシャル・タイムズで掲載された広範なインタビューに由来します。記事はこちらで参照できます： https://www.ft.com/content/2aa6750d-48b7-441e-9e84-7cb6467c5366 3 レーンのコメントは今月初めの5月9日に公表され、こちらで参照できます： https://www.ft.com/content/05a12645-ceb2-4cd5-938e-974b778e16e0 4 S&Pグローバルのレポート「Next Generation EU Will Shift European Growth Into A Higher Gear」はこちらで参照できます： https://www.spglobal.com/ratings/en/research/articles/210427-next-generation-eu-will-shift-european-growth-into-a-higher-gear-1192994 推奨 GFIS推奨ポートフォリオ対カスタムベンチマーク指数 ECBの見通し: 卵の殻の上を歩く ECBの見通し: 卵の殻の上を歩く デュレーション 地域配分 スプレッド商品 戦術的トレード 利回りとリターン グローバル債利回り 過去のリターン

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Highlights The ECB is not repressing interest rates and penalizing savers. The Eurozone shows none of the symptoms associated with financial repression. Global excess savings are keeping US rates depressed. If US rates are low, then European rates must be lower because of structural problems in the region’s economy, independent of the ECB’s preferences. Structurally, there is still no case for European yields to rise meaningfully compared to the rest of the world. Despite positive forces over the next year or two, European financials will remain long-term underperformers. European utilities will outperform US ones. The euro is transforming into a safe haven like the yen and the Swiss franc. Feature By maintaining negative short rates, the European Central Bank is conducting severe financial repression, which distorts rates of return and penalizes savers. This is a common refrain among many insurers and pension plan managers investing in Europe and among a large number of the region’s politicians. Chart 1The ECB's Financial Repression? At first glance, this criticism is apt. For the past five years, negative policy rates have forced safe-haven Bund yields to trade well below the Euro Area’s nominal GDP growth (Chart 1). Moreover, the real ECB deposit rate remains well below the Holston, Laubach-Williams estimate of R-star (the real neutral rate of interest). If we go beyond these superficial observations, it is far from clear that the ECB is conducting financial repression or distorting market rates any more than other major global central banks. Is It Financial Repression? The ECB is not conducting financial repression; rather, it is responding to powerful economic forces in Europe and beyond that are depressing interest rates. The definition of financial repression is crucial to this assessment. Financial repression involves monetary authorities actively suppressing interest rates to the advantage of the borrowers and users of capital at the expense of the savers, whose risk-free investments then provide subpar rates of returns. Following this definition, financial repression shows these clear symptoms: A low savings rate. Suppressed interest rates do not adequately compensate savers to forgo consumption. Thus, they are less likely to put money aside. A significant build-up of debt. Real interest rates are below fair market value, which subsidizes borrowing. A significant expansion of the money supply. Money supply expands rapidly in response to strong credit demand in the economy. Plentiful capital expenditures. Savers must take on more financial risk to make appropriate returns on their assets, which compresses risk premia. Depressed internal rates of return boost the net present value of investment projects and thus cause investments to account for a large share of output. A current account deficit. A nation’s current account balance equals its savings minus its investments. By depressing savings and stimulating investments, financial repression results in a current account deficit or a sharply deteriorating current account balance. Above-trend GDP growth. By depressing savings and boosting investments, financial repression lifts cyclical spending and forces the GDP to rise above its potential. The problem for commentators who argue that the ECB is conducting financial repression is that the Euro Area meets none of these criteria. First, Eurozone money and credit growth has run well below that of the US ever since the euro crisis, despite ECB policy rates that are constantly lower than the Fed Funds rate. Moreover, since the ECB cut rates to zero, the pace of money and credit creation has decelerated significantly compared to their pre-crisis trends (Chart 2). Second, the Euro Area’s real GDP per capita, nominal GDP per capita, and the GDP deflator have also fallen 4.6%, 5.2% and 5%, respectively, behind those of the US, since the ECB has cut interest rates to zero (Chart 3). Moreover, the growth of these variables has also decelerated significantly over this period, which is consistent with depressed credit demand. Additionally, despite the inferior performance of European activity metrics compared to those of the US since the introduction of the common currency, European government bonds have performed exactly in line with those of the US (Chart 3, bottom panel) and have therefore outperformed in real terms. This is inconsistent with financial repression by the ECB. Chart 2Europe's Money And Credit Trends Are Too Tame... Chart 3... So Are Output Volume And Price Trends Finally, the Euro Area runs a current account surplus of 2.3% of GDP, which has grown by 4.1% of GDP since late 2008. This is the clearest sign that Eurozone savings have become excessive relative to investment, despite the surge in government deficits in the wake of the COVID-19 pandemic. Excess savings are not typically associated with central banks artificially distorting interest rates. Bottom Line: The economic developments in the Euro Area do not correspond to what would be anticipated if the ECB were repressing interest rates. The growth rate of money and credit has structurally slowed both in absolute terms and compared to that of the US. The same deceleration is evident in both real and nominal output per person, as well as in price levels. Finally, the Eurozone’s current account surplus has widened, which highlights that savings have grown in excess of investments. The Eurozone Needs Lower Interest Rates Than The US The ECB must set appropriately low interest rates, if US yields are low across the curve. In a way, the case that the Federal Reserve is conducting financial repression is stronger than the case against the ECB. Over the past twelve years, nominal and real output per capita have grown more robustly in the US, while money as well as credit expansion and inflation have also been stronger. The US runs a persistent current account deficit of 3.1% of GDP, which also indicates that it is not awash in excess domestic savings. Chart 4Maybe The Fed Is Repressing Interest Rates We could even argue that the case for the Fed repressing interest rates is growing stronger. The federal budget deficit has expanded to 19% of GDP, even as the unemployment rate tumbles (Chart 4). Moreover, US quarterly GDP growth has averaged 8.5% since the fourth quarter of 2020 and, according to Bloomberg consensus estimates, is anticipated to average 6.3% for the remainder of the year. US inflation is also strong. Annual core CPI Inflation hit 3% in April; monthly core inflation was 0.92%, or an annualized rate of 11.6%, the strongest reading in almost 40 years. Yet, even in the US, the argument that the Fed is repressing interest rates is ultimately weak, despite the aforementioned economic strength. The Fed is accommodating global market pressures that are greater than those of the US economy. In other words, even if the Fed did not set short rates, US interest rates would be low across the curve because of global excess savings. Chart 5Too Much Savings, Everywhere Excess savings around the world constitute an exceptionally strong gravitational force that anchor global rates at low levels. As Chart 5 shows, since the early 1990s, global private savings have outpaced investments by a cumulative 163% of GDP. Accumulated government deficit, which has accounted for 99% of global GDP, has been far too small to absorb fully this surplus of savings. The resulting imbalance places downward pressure on global inflation (a consequence of demand falling short of supply) and real interest rates, which means it depresses nominal interest rates across the curve. US interest rates also feel the yield-compressing effect of these excess global savings, even if the US economy does not generate excess savings itself (it runs a current account deficit). The major DM central banks are removing a greater proportion of the float of safe-haven from their jurisdictions than the Fed (Chart 6). The resulting scarcity of safe-haven securities means that US fixed-income products remain the natural outlet for global investors seeking safety and liquidity. Thus, despite the US lack of excess savings, Treasury yields have traded below nominal GDP growth 55% of the time over the past 30 years, no matter how strong US activity is or how wide federal deficits become. If the Fed has little choice but to accept low US interest rates, then the Eurozone must accept even lower interest rates because of its large excess savings. As Chart 7 illustrates, the 2-year and 10-year interest rate spreads (both in nominal and real terms) between the Eurozone and the US track the gap between the US current account deficit and the Europe’s current account surplus. Chart 6Treasurys Are The World Only Plentiful Safe-Haven Chart 7Europe's Excess Savings Justify Lower Rates Across The Curve The Eurozone lower rate of return on capital is another force depressing rates relative to the US (Chart 8). This lower return on capital reflects the following structural problems with the European economies: Excess capital stock. The Eurozone peripheral nations have abnormally large capital stocks in relation to their GDPs (Chart 9). As we previously argued, this feature means that Europe suffers from large amounts of misallocated capital, which hurt the return on capital. Chart 8Capital Is Not Rewarded In Europe Chart 9Too Much Capital! Ageing capital stock. Not only is the Eurozone capital stock too large relative to the size of its economy, it is also older than that of the US (Chart 10). An ageing capital stock, especially in a world where ICT spending is one of the key sources of innovation and growth, further hurts the Euro Area’s return on capital. Lower incremental output-to-capital ratio (Chart 11). The Euro Area generates significantly less output per unit of investment than the US. This confirms the notion that capital is misallocated and that it is used less productively than in the US. Chart 10Europe's Capital Is Ageing Too Chart 11Poor Capital Utilization Chart 12Europe's Inferior Productivity Problem The final force limiting European interest rates compared to the US is the Euro Area’s inferior potential growth rate. The Eurozone’s population is ageing, and it will start to contract in 2030. Moreover, multifactor productivity growth is weaker than in the US (Chart 12). A lower potential GDP growth accentuates the discount in the Euro Area neutral rate of interest compared to the US. Bottom Line: Despite the relative economic vigor of the US, global excess savings lower US rates across the curve. The ECB has no choice but to accept even lower European rates, because the European economy suffers from greater excess savings than the US: its return on capital is inferior, and its neutral rate of interest is hampered by its lower potential GDP growth. Investment Conclusions For European rates to avoid the fate of Japan and to circumvent suffering many more decades wedged near zero, some important changes must take place. First, at the global level, excess savings must recede. This will allow global interest rates to increase, especially those of the US. Even if Eurozone rates continue to trade at a discount to the US, safe-haven yields in Europe would nonetheless climb in absolute terms. The fall in the global ratio of workers relative to dependent people, most notably in China where the 2020 population census has just highlighted the trend, is one factor pointing toward a potential gradual decline in global savings. For the moment, absorbing excess savings means that global fiscal policy must remain accommodative. Although fiscal authorities around the world continue to display greater profligacy than they did in the wake of the Great Financial Crisis, there is no guarantee that they will not revert to their old ways. In fact, BCA’s Global Investment Strategy service recently showed that the US fiscal policy is set to become more of a constraint on growth next year than it has been in 2020 and 2021 (Chart 13).  One factor to monitor is the international shift in voters’ preferences toward left-wing economic policies, which often results in more generous fiscal spending. If this trend persists, then global fiscal deficits will close more slowly than the private sector savings will decline. This process will both be inflationary over the long run and impose upward pressure on real interest rates worldwide. But the fiscal excesses of the current moment may force opposition parties to restrain spending whenever they come into power. Chart 13Will Global Fiscal Policy Morph Into a Headwind? Second, to narrow the spread between the Eurozone and US interest rates, the Euro Area must tackle its low rate of return on capital. Practically, this means that much of the excess capital stock weighing on European rates of returns must be written down. Doing so will require more cross border mergers and acquisitions within sectors in the Eurozone. However, the loss-recognition process on nonviable capital will be deflationary. Thus, to facilitate these asset write-downs, the region’s fiscal policy and monetary policy must first remain extremely accommodative. It is far from certain that European authorities will resist reverting to their old ways. A structural underweight on European financial equities remains appropriate. Even if the Eurozone enacts the reforms necessary to invite the peripheral asset write-downs required to boost rates of return in the long-run, in the interim, these reforms will be deflationary. Consequently, no matter what, Eurozone yields will remain well below the US for years to come. Moreover, European credit demand is unlikely to outperform the rest of the world for the coming few years. In this context, the RoE of European banks will remain low. Therefore, our current recommendation to overweight this sector is only valid as a near-term play on the global economic recovery and is not a strategic recommendation. By contrast, European utilities will structurally outperform their US counterparts. European utilities offer higher RoE than US ones and have healthier leverage (Chart 14). Moreover, European utilities trade at discounts to US firms on a price-to-book, price-to-cash flow, price-to-sales and dividend yield basis (Chart 15). Additionally, as yield plays, structurally lower European yields relative to those of the US will advantage European utilities on a long-term basis. Chart 14European Utilities Offer More Appealing Operating Metrics... Chart 15... And Are More Attractively Priced Than US Ones Finally, the euro will increasingly trade as a safe-haven currency like the yen and the Swiss franc. First, after a decade of trial by fire, EU integration and solidarity have gained rather than lost momentum and the EU break-up risk has proved to be limited to Brexit. Second, although the Eurozone economy is pro-cyclical, so are the Swiss and Japanese economies. Instead, the Euro Area’s structurally elevated savings rate and current account balance are transforming this economy into a net creditor, with a positive net international investment position equal to -0.1% of GDP. Moreover, the bloc’s low inflation will continue to put upward pressure on the euro’s long-term fair value. If we add the Euro Area’s low interest rates to the mix, then the euro is likely to behave increasingly as a funding currency. Thus, while the euro will benefit from the USD’s weakness forecasted by our Foreign Exchange Strategists, it will underperformed more pro-cyclical currencies such as the SEK, the NOK, or the GBP, which do not suffer from the same ills as the Eurozone.   Mathieu Savary, Chief European Investment Strategist Mathieu@bcaresearch.com

ハイライト グローバル通貨は米ドルに対して重要な水準にある。 ポジショニングの観点からは、DXY指数が89〜90を下回ると非常に弱気と判断される一方で、現在水準からの反発は3〜4％程度で抑えられるはずである。 米ドルを押し下げた主な要因は二つある：米国の実質金利の低下と、米国外で回復する経済モメンタムである。 株式市場が5月に乱高下する中で、米ドルに季節的な強さが見られる可能性がある。しかし、これは新たなドル売りポジションの機会を提供するだろう。 連邦準備制度理事会（FRB）は、現時点のインフレの上振れを一時的と見る姿勢を維持しつつ、労働市場に注目し続けるだろう。これにより、米国の実質金利は他国に比べて抑制され続ける。 新規トレード案：通貨ボラティリティ上昇を見越してCHF/NZDのロング。さらにUSD/JPYが110に触れれば売り。 特集 チャート I-1 米ドルは重要な岐路にある ドルは重要な岐路に立っている ドルは重要な岐路に立っている 1月から3月にかけての短期的な上昇の後、米ドルは再びテクニカルな崩壊寸前にある。DXY指数、FRBの実効実勢ドル、そして新興国通貨ベンチマークはいずれも重要な水準に位置している（チャート I-1）。崩壊が確認されれば、2020年3月に始まったドルのベア相場が継続していることになり、ドルからの投機的な資金流出を引き起こすだろう。 我々の12月の為替見通しでは、1循環的な観点（12〜18か月の時間軸）でDXYは80に向かうとの見方だった。しかし同時に、DXY指数が第1四半期に94〜95に達すると予想しており、以降も複数回にわたりその見方を補強してきた。DXY指数は93.5でピークアウトしたため、次の最もありそうな動きを検討することが有益である。これを行うために、12月の記事以降に何が変わったか、何が変わっていないかを再検討する。 投資家ポジショニングの見極め チャート I-2 ドル・ブルは降伏している ドル買いの強気筋が降参している ドル買いの強気筋が降参している 2021年に入るとドル売りはコンセンサスのトレードであり、通貨は大幅に売られ過ぎていた。逆張り派にとっては強気に振る舞うことが功を奏した（チャート I-2）。その後、投資家は米ドルのショートポジションを解消し、JPYやCHFをファンディング通貨とするキャリートレードに注力している。投機筋はユーロのロングを維持しているが、その賭けの規模は未決済建玉のネット30％から現在は約10％に縮小している。GBPやCADのポジショニングは依然として高水準にあり、これら通貨はテクニカルな押し戻しに脆弱であることを示唆している。 興味深いことに、シティグループの米ドルに対するセンチメント指標は1月の底に近い。ここから見ると、直近数週間でドルショートの蓄積があったことが分かる。これが最近のドルの弱さを説明する一助となっている。 今後、ポジショニングはドルの次の動きを指し示すうえであまり有用ではないだろう。なぜならポジショニングは極端な局面でしか有効に機能しないからだ。さらに言えば、それはカウンタートレンドの動きを測るうえでのみ有用である。2000年代初頭の多くの期間、ドルのセンチメントは弱気であったが、反発は4〜6％で抑えられていた。先の十年のドル・ブル相場では、センチメントは概ね強気圏にとどまったが、ドルは脱出速度を達成した（チャート I-3）。 チャート I-3 ドルとレジームシフト ドルとレジーム・シフト ドルとレジーム・シフト 現時点のポジショニングから見ると、DXY指数が89〜90を下回ることは極めて弱気のサインとなる一方、現在水準からの反発は3〜4％程度で抑えられるはずだ。テクニカルな観点からドルは重要な分岐点にいる。 連邦準備制度理事会、インフレ、金利 2021年初め、金利はドルに有利な動きを続けており、これは昨年中盤から続くトレンドだった。米独10年金利差は昨年の約100ベーシスポイントの低水準から3月には200ベーシスポイント超の高水準まで拡大した。最近では金利差はドルに不利に動き始めており、これが3月以降のドル指数全般の反転を説明している。現在の米独10年スプレッドは180ベーシスポイントにある。 為替レートはインフレが通貨の購買力を侵食するため、実質金利差を反映する傾向がある。したがって名目金利に何が起きているかだけでなく、基調としてのインフレ動向を見極めることが重要である。これはインフレがしばしば遅行変数であるため複雑さを増すが、インフレの行方を把握することは通貨ストラテジーにとって非常に有用だ。 出発点として、米国は実質金利の観点で芳しくない。チャート I-4は実質金利とドルの広い相関を示している。スイス、スウェーデン、ユーロ圏のような低金利国では、米国実質金利のピークはこれら通貨の循環的な反発と一致した。円のような通貨でも、実質金利は米国と比べて好ましい。名目10年金利は10bpで、10年物のインフレスワップは23bpである。これにより日本の実質金利はほぼ100bp、米国より上回っている。 チャート I-4A 金利はドルに不利に動いた 金利はドルに対して逆に動いた 金利はドルに対して逆に動いた チャート I-4B 金利はドルに不利に動いた 金利はドルに対して変動した 金利はドルに対して変動した チャート I-4C 金利はドルに不利に動いた 金利は米ドルに対して動いた 金利は米ドルに対して動いた もちろん、米国でインフレが上振れしているため、FRBが市場に伝えているより早くテーパリングを行ったり、想定より速く利上げを行ったりする可能性はある。カナダ銀行やイングランド銀行のような他の中央銀行は既に資産購入の縮小を示唆していることを考えれば驚くことではない。しかし、たとえFRBが資産購入のテーパリングを決めても、その影響が一部の市場参加者が期待するほど単純ではないだろう。 なぜかを理解するために、チャート I-5を考えてほしい。これは他の中央銀行と比較して、FRBのバランスシートのインパルスがGDP比で既に約13％縮小していることを示している。本質的に、FRBは他のG10中央銀行に比べて「ステルス的」に資産購入を縮小してきた。この動きは今年ドルをサポートしてきた。また市場はフェデラルファンド金利の見通しをFOMCの中央値よりもかなり上に織り込ませている（チャート I-6）。したがって、FRBの資産購入テーパリングの見通しは既に資産価格に織り込まれている可能性がある。 チャート I-5 FRBによるステルステーパリング？ 米FRBによるステルス・テーパリングか？ 米FRBによるステルス・テーパリングか？ チャート I-6 市場は既にタカ派なFRBを織り込んでいる 市場は既にタカ派のFRBを織り込んでいる 市場は既にタカ派のFRBを織り込んでいる 今後、我々のグローバル・フィクスト・インカムの同僚は、FRBが次にテーパリングすると期待される順番で既に下位に移動していることを指摘している。2 日銀と欧州中央銀行はほとんど資産購入を縮小していない。彼らが6月10日と6月18日の会合で何か重要な発表をする可能性は低いかもしれないが、市場は言葉の変更に注目し続けるだろう。 チャート I-7 浪費的な米国政府は歴史的にドルにとって弱材料だった 浪費的な米国政府は歴史的にドル安傾向にあった 浪費的な米国政府は歴史的にドル安傾向にあった 投資家がFRBのメッセージを額面どおり受け取り、FOMCがインフレの上振れを見送る姿勢を維持すると判断すれば、米国の実質金利は低迷し続け、ドルは下押しされるだろう。我々は米国のインフレが一時的か恒常的かについて確信は持っていない。しかしながら、米国経済は他の先進国よりも内需を刺激しており、生産ギャップを埋めるために必要以上の財政・金融刺激を行っているため、歴史的にはこれは米ドルにとって弱材料である（チャート I-7）。 触媒としての経済モメンタム 金融政策が国内の経済状況に合わせて調整される程度に、成長モメンタムは明らかに米国から他国へと回転している。これはECBやRBAのような他の中央銀行がBoEやBoCの歩みを追う可能性が徐々に高まっていることを示唆する。世界各地の製造業購買担当者景気指数（PMI）は米国水準を上回っており、サービスPMIが追いつくのは時間の問題である。 チャート I-8はユーロ圏のデータが継続して上振れしていることを示しており、ユーロ圏と米国の経済サプライズ・インデックスは10年ぶりの高水準にある。これは歴史的に米国よりもユーロ圏の債券利回りがやや高くなることと同義であり、通貨を支援してきた。ZEWとSentixの期待コンポーネントは今月さらに強かったことから、欧州およびドイツの成長は夏にかけて健全に推移するはずだ（チャート I-9）。 チャート I-8 欧州債利回りが上昇するための小さな窓 欧州利回り上昇の小さな機会 欧州利回り上昇の小さな機会 チャート I-9 ユーロ圏のデータは強さを保つ ユーロ圏のデータは堅調を維持 ユーロ圏のデータは堅調を維持 中国の刺激策の減速はグローバル成長のリスクであることに同意する（我々の中国ストラテジストが指摘する通り）が、逆方向の要因も二つ働いている： 中国の刺激は長いラグを伴って経済に影響を与える。前回のサイクルでは中国のクレジットのピークは2016年にあったが、世界貿易が鈍化するのは2018年まで待たなければならなかった（チャート I-10）。これが、最大の買い手からのクレジット創出が鈍化しているにもかかわらず、コモディティ価格が後退していない理由の一端を説明する。 経済はクレジット形成だけに依存できない。ある時点で、バトンは投資家の動意（animal spirits）に渡されなければならない。マネーの回転率、つまり貨幣創出1単位あたりに何単位のGDPが生み出されるかはその一つの力である。チャート I-11は、マネーの回転率が米国外で、中国を中心に速く上昇していることを示している。 チャート I-10 中国のクレジット・インパルスは遅れて効く 中国のクレジット・インパルスは遅れて作用する 中国のクレジット・インパルスは遅れて作用する チャート I-11 米国と比較したマネーの回転率 米国とのマネー・ベロシティ比較 米国とのマネー・ベロシティ比較 上記のトレンドにより、我々はドルの強さはカウンタートレンドの動きに過ぎず、FRBが方針転換して示唆より速く金融引き締めに動くまでは、そうした動きは逆張りすべきだと確信している。弱い世界成長の期間は我々の見方に対する別のリスクとなる。 興味深いことに、中国人民元は金利差が縮小しているにもかかわらず新たな循環的安値をつけている。2月のスペシャルレポートでは、USD/CNYは6.2に向かうと示唆したが、これは米中の金利差が縮小しても成り立つ見通しだった。もし中国の経済活動がクレジット形成の鈍化にもかかわらず比較的堅調に推移するなら、USD/CNYはさらに低下するだろう。 チャート I-12 新興市場の成長は依然として弱い 新興市場の成長は依然として弱い 新興市場の成長は依然として弱い USD/CNYの下落は必要条件ではあるが、十分条件ではない。米国に対する相対的な観点で見ると、新興国の成長は昨年のCOVID-19リセッションの最深部よりも悪いままである（チャート I-12）。我々の新興市場ストラテジストは、EM通貨が持続的にアウトパフォームするには経済状況の改善が必要だと見ている。ワクチン接種キャンペーンが新興国に広がることがこの変化の鍵を握る可能性が高い。 ドル・ショートポジションに対する実際のリスク 現在水準でドルをショートするリスクは株式市場から生じる。 先進国通貨は自国株式の相対パフォーマンスを先行して上昇してきた。これは歴史的な相関からの逸脱である（チャート I-13）。防御的な株式を好むような株式市場のリセットが起きれば、米国株式・債券への資金流入が起きて先進国通貨にとって逆風となり、ドルを押し上げるだろう。今期の決算で米国はより強いポジティブな収益改定を享受しているのは懸念材料である。 対応して、米国のプット／コール比率は依然として非常に低く、多くの株式市場で自信過剰が支配している（チャート I-14）。 チャート I-13A 通貨は株式のアウトパフォームを先行している 通貨はエクイティのアウトパフォーマンスに先行している 通貨はエクイティのアウトパフォーマンスに先行している チャート I-13B 通貨は株式のアウトパフォームを先行している カレンシーはエクイティのアウトパフォーマンスに先行している カレンシーはエクイティのアウトパフォーマンスに先行している チャート I-14 米国株の熱狂が目立つ 米国株式にあふれる熱狂 米国株式にあふれる熱狂 チャート I-15 株式とドルは乖離している エクイティとドルが乖離している エクイティとドルが乖離している 市場リセットの性質を考慮することは重要だ。例えば： 世界株が調整するが、テクノロジーとヘルスケアが下落を主導する。こうしたシナリオでは、米国がこれらのディフェンシブセクターの比率が高いため、ドルは相対的に弱含みとなる（チャート I-15）。グロースやディフェンシブが主導する場合は現在進行中のようにドルが下落する。逆にバリュー株や景気循環株が下落を主導すれば反対の結果になる。 世界株が調整し、同時に債券利回りも低下する。初期反応としては米国への資金流入が加速しドルは強くなるが、これは同時に米国債利回りがドイツ国債（Bund）や日本国債（JGB）に向けて収斂するため、ドルの魅力を抑えるだろう。さらに米国の実質金利はさらに急落する。こうしたシナリオでは我々はドルの強さに対して売りを仕掛けるだろう。 世界株が調整するが利回りは上昇する。もし米国利回りが先導して上昇するなら、当初はドルが買われるが、同時に米国株からの資金流出が加速する。これが持続的な回転であるなら、最終的にはドルは下落するだろう。というのも海外市場は利回り上昇に高くレバレッジしているからである。 要するに、米国債市場は魅力的な利回りを提供しており、米国株式市場は市場調整時に防御的に振る舞う可能性がある（歴史的にもその傾向がある）。これが今日ドルをショートすることのリスクを生んでいる。 通貨ストラテジー 通貨市場は重要な岐路にある（チャート I-1 魅力的な通貨バスケットに対して引き続きUSDをショートする。この観点から我々は既にスカンジナビア通貨のロングを保有している。 ポジショニングが歪んでいることからUSD/JPYをショートする。USD/JPYは本日110で指値売りを入れている。またユーロの指値買いを1.18に引き上げている。興味深いことにEUR/JPYのクロスは数年にわたる下落トレンドを突破した。このクロスはドルと逆相関がある。 通貨ボラティリティ上昇を見越して本日CHF/NZDを買う。これは各中央銀行のテーパリング政策（FRB対他の先進国経済）に市場が悩む局面で良い保険となる（チャート I-16）。 株式市場の調整が一巡するのを待ち、その後改めてドルを全面的にショートするゴーサインが出るだろう。歴史的に5月はドルにとって良い月であり、株式にとってはボラティリティの高い月である（チャート I-17）。とはいえ、ドルのベア相場はしばしば長期サイクルで進行する。 チャート I-16 保険としてCHF/NZDを買う 保険としてCHF/NZDを買う 保険としてCHF/NZDを買う チャート I-17 ドルと季節性 ドルと季節性 ドルと季節性   Chester Ntonifor 外国為替ストラテジスト chestern@bcaresearch.com   脚注 1 フォーリン・エクスチェンジ・ストラテジー特別レポート、"2021 Key Views: Tradeable Themes," 2020年12月4日付を参照。 2 グローバル・フィクスト・インカム・ストラテジー特別レポート、"Who Tapers Next?," 2020年12月04日付を参照。 通貨 米ドル チャート II-1 USD テクニカル 1 米ドルのテクニカル指標 1 米ドルのテクニカル指標 1 チャート II-2 USD テクニカル 2 USDのテクニカル分析 2 USDのテクニカル分析 2 最近の米国のデータは混在している： 時間当たり平均賃金は4月に前月比0.7％改善し、予想の0.1％を上回った。 非農業部門雇用者数は4月に266千人増加し、予想の978千人や3月の770千人を大きく下回った。 失業率は3月の6％から4月に6.1％へわずかに悪化し、予想の5.8％改善から外れた。  NFIB中小企業景況感指数は3月の98.2から4月に99.8へ小幅上昇した。 4月のCPIは前年比4.2％で、予想の3.6％上昇を上回った。前月比では4月に0.8％上昇し、コンセンサスの0.2％を大きく上回った。 コアCPIは4月の前年比で3％となり、予想の2.3％を上回った。 PPIも上振れし、4月の前年比で6.2％となり、予想の5.8％上昇を上回った。 米ドルのDXY指数は今週1.3％下落した。CPIは急上昇したが、雇用は期待を大きく下回った。市場が期待するタイミングでFRBの「最大雇用」目標が達成される可能性は低く、この組み合わせ—FRBのハト派的姿勢の持続と潜在的な大幅インフレ—はドルにとって弱材料である。   レポートリンク： Arbitrating Between Dollar Bulls And Bears - 2021年3月19日 The Dollar Bull Case Will Soon Fade - 2021年3月5日 Are Rising Bond Yields Bullish For The Dollar? - 2021年2月19日 ユーロ チャート II-3 EUR テクニカル 1 EUR テクニカル 1 EUR テクニカル 1 チャート II-4 EUR テクニカル 2 ユーロ テクニカル 2 ユーロ テクニカル 2 ユーロ圏の最近のデータは強い： 3月のドイツ輸入は前月比6.5％と、予想の0.7％を大きく上回った。 ドイツZEW現状は5月に-40.1となり、4月の-48.8を大きく上回った。 ドイツZEW期待も5月に84.4と予想の72を上回った。  ユーロ圏全体のZEW景況感は5月に66から84へ上昇した。 Sentixの投資家信頼感は4月の13.1から5月に21へ改善し、予想の14を上回った。 Sentixの期待は36.8の過去最高に上昇した。現況は2020年2月以降で初めてプラス圏に入った。 3月の鉱工業生産は前月比0.1％増で、予想の0.7％を下回った。 ユーロは今週対米ドルで1.3％上昇した。ZEW調査の好結果は、ユーロ圏に有利な世界的な成長回転の期待を補強する。ECBが資産購入を縮小しない可能性はあるものの、力強いワクチン接種がサービス部門を中心にさらなるデータの上振れをもたらすはずだ。ユーロ圏の経済サプライズ指数（ESI）は高水準にあり、米国のESIは2020年7月のピークから急落しているのとは対照的である。   レポートリンク： Relative Growth, The Euro, And The Loonie - 2021年4月16日 Portfolio And Model Review - 2021年2月5日 On Japanese Inflation And The Yen - 2021年1月29日 円 チャート II-5 JPY テクニカル 1 JPY テクニカル 1 JPY テクニカル 1 チャート II-6 JPY テクニカル 2 JPY テクニカル 2 JPY テクニカル 2 今週の日本のデータは乏しかった： 家計支出は3月に前月比7.2％増と、予想の2.1％増を大きく上回った。 日本の経常収支は3月に2.65兆円と、2月の2.9兆円から悪化した。 エコノミスト・ウォッチャーズ調査は4月に期待を裏切り、現状は49から39.1へ、期待は49.8から41.7へ低下した。 円は今週対米ドルで0.5％上昇した。長引く緊急事態宣言の延長は短期的に円を押し下げる圧力となるだろう。しかし、日本株と通貨が売られ過ぎの状態にあることから、本年後半にかけて円に対して慎重に楽観的である。   レポートリンク： The Dollar Bull Case Will Soon Fade - 2021年3月5日 On Japanese Inflation And The Yen - 2021年1月29日 The Dollar Conundrum And Protection - 2020年11月6日   英国ポンド チャート II-7 GBP テクニカル 1 GBP テクニカル 1 GBP テクニカル 1 チャート II-8 GBP テクニカル 2 英ポンド テクニカル指標 2 英ポンド テクニカル指標 2 英国の最近のデータは弱い： 建設PMIは4月に61.6とほぼ横ばいで推移した。 第1四半期のGDPは前期比で1.5％減となった。より失望的だったのは、企業設備投資が第1四半期に前期比で11.9％減、前年比で18.1％減少した点である。 3月のGDPは前月比2.1％増と強かったことから、第1四半期の落ち込みは主にロックダウンが原因であることを示唆している。 3月の製造業生産は前月比2.1％増で、1％のコンセンサスを上回った。 3月の貿易赤字は117.1億ポンドに縮小した。  ポンドは今週対米ドルで1.7％上昇した。第1四半期の弱い生産データは主に冬季のロックダウンによるものであり、3月の改善がその穴埋めを示している。制限の解除に伴い、サービス業の生産と家計消費（過剰貯蓄に起因）は製造業の最近の反発に速やかに追いつくはずだ。ただし市場は英国のワクチン接種のアウトパフォームを過大評価している可能性があり、それは小型株の過大評価として反映されている。   レポートリンク： Portfolio And Model Review - 2021年2月5日 The Dollar Conundrum And Protection - 2020年11月6日 Revisiting Our High-Conviction Trades - 2020年9月11日 豪ドル チャート II-9 AUD テクニカル 1 AUD テクニカル 1 AUD テクニカル 1 チャート II-10 AUD テクニカル 2 AUD テクニカル分析 2 AUD テクニカル分析 2 オーストラリアの最近のデータは良好である： NAB企業景況感は4月に17から26へ上昇した。 NABビジネスサーベイ指数も4月に25から32へ上昇した。 小売売上高は3月に前月比1.3％増となり、予想の1.4％をわずかに下回った。 第1四半期の小売売上高は前期比で0.5％減と、推定の0.4％減を下回った。 第1四半期のCPIは前期比0.6％、前年比1.1％と予想を下回った。 AUDは今週対米ドルで1.2％上昇した。NABの景況感と企業状況指数は記録的な高さだが、オーストラリアの物価圧力は依然として弱く、ワクチン接種の進捗も遅れている。それでも設備投資意向や受注残のような先行指標は改善している。当社は主にメキシコの米国回復の近接性を活かすためにAUD/MXNをショートしている。   レポートリンク： The Dollar Bull Case Will Soon Fade - 2021年3月5日 Portfolio And Model Review - 2021年2月5日 Australia: Regime Change For Bond Yields & The Currency? - 2021年1月20日 ニュージーランドドル チャート II-11 NZD テクニカル 1 NZドル テクニカル分析 1 NZドル テクニカル分析 1 チャート II-12 NZD テクニカル 2 NZD テクニカル分析 2 NZD テクニカル分析 2 ニュージーランドの最近のデータは乏しかった： 電子カード小売売上高は4月に前月比4％増となり、3月の0.8％減から回復した。 食品価格指数は4月に前月比1.1％となり、3月の0％から上昇した。 NZDは今週対米ドルで0.8％上昇した。ニュージーランドの最近のポジティブなデータを踏まえ、我々のグローバル・フィクスト・インカム・ストラテジーの同僚はRBNZが2021年後半にテーパリングに動く最有力候補と判断している。ただし、Q2のインフレ期待は依然として弱く、観光部門は国境閉鎖の影響を受け続けているため、キウイに対しては慎重である。   レポートリンク： Portfolio And Model Review - 2021年2月5日 Currencies And The Value-Versus-Growth Debate - 2020年7月10日 Updating Our Balance Of Payments Monitor - 2019年11月29日 カナダドル チャート II-13 CAD テクニカル 1 CADのテクニカル分析 1 CADのテクニカル分析 1 チャート II-14 CAD テクニカル 2 CADのテクニカル分析 2 CADのテクニカル分析 2 カナダの最近のデータはやや失望的だった： 雇用報告は落胆させる内容だった。カナダは4月に207.1千の雇用を失い、参加率は65.2％から64.9％に低下した。 失業率も4月に7.5％から8.1％へ悪化し、予想を上回った。  Ivey PMIは4月に72.9から60.6へ低下し、予想通りの結果となった。 CADは今週対米ドルで1.35％上昇した。ルーニー（カナダドル）の数か月にわたる上昇や住宅価格の上昇にもかかわらず、CADは実効実質為替レートから見て依然割安である。原油価格の上昇は通貨を引き続き支援するはずだ。COVID-19ロックダウンの延長やワクチン接種の遅れは下振れリスクである。   レポートリンク： Relative Growth, The Euro, And The Loonie - 2021年4月16日 Will The Canadian Recovery Lead Or Lag The Global Cycle? - 2021年2月12日 Currencies And The Value-Versus-Growth Debate - 2020年7月10日   スイス・フラン チャート II-15 CHF テクニカル 1 CHF テクニカル 1 CHF テクニカル 1 チャート II-16 CHF テクニカル 2 CHF テクニカル 2 CHF テクニカル 2 スイスの最近のデータは中立的だった： 失業率は4月に3.3％とほぼ横ばいで、予想どおりであった。 スイス・フランは今週対米ドルで1％上昇した。実効実質為替レートは公正価値より1標準偏差低く、フランは割安である。世界貿易の回復が続けばフランは恩恵を受けるだろう。ただしSNBは過度のフラン高、特にユーロに対しては引き続き抑制する姿勢を取ると我々は考えている。したがって長期的にはフランはユーロに遅れをとると見ている。通貨ボラティリティが高まれば本日CHF/NZDのロングを仕掛ける予定だ。    レポートリンク： Portfolio And Model Review - 2021年2月5日 The Dollar Conundrum And Protection - 2020年11月6日 On The DXY Breakout, Euro, And Swiss Franc - 2020年2月21日   ノルウェー・クローネ チャート II-17 NOK テクニカル 1 NOK テクニカル 1 NOK テクニカル 1 チャート II-18 NOK テクニカル 2 NOK テクニカル指標 2 NOK テクニカル指標 2 ノルウェーの最近のデータは混在している： 4月のCPIは3％で、予想どおりだった。 PPI成長率は4月の前年比で22.5％を記録した。 第1四半期のGDPは前期比で0.6％低下し、推定の0.4％減を下回った。 本土ベースのGDPも第1四半期に前期比1％減と期待を下回った。 NOKは今週対米ドルで1％上昇した。第1四半期の軟調なデータは、2020年3月の安値以来の顕著なパフォーマンスを踏まえると短期的にはNOKを抑える可能性がある。それでも原油価格の上昇はNOKを支援し続けるだろう。ワクチン接種の進捗がユーロ圏並みであれば通貨の追い風となる。   レポートリンク： Portfolio And Model Review - 2021年2月5日 Revisiting Our High-Conviction Trades - 2020年9月11日 A New Paradigm For Petrocurrencies - 2020年4月10日   スウェーデン・クローナ チャート II-19 SEK テクニカル 1 SEK テクニカル指標 1 SEK テクニカル指標 1 チャート II-20 SEK テクニカル 2 SEK テクニカル分析 2 SEK テクニカル分析 2 最近のスウェーデンのデータはやや良好である： 失業率は3月の8.4％から4月に8.2％へ低下した。 4月のCPIは前年比2.2％、前月比0.2％で予想どおりだった。 CPIFは4月に前年比2.5％、前月比0.3％となり、いずれもコンセンサスを上回った。 SEKは今週対米ドルで2％上昇した。スウェーデンのワクチン接種の進捗はユーロ圏に僅かに劣る程度である。コモディティ主導の混雑したトレードからセンチメントが抜け出すことがあれば、近い将来の欧州回復を背景に輸出主導のSEKを支援する可能性がある。   レポートリンク： Revisiting Our High-Conviction Trades - 2020年9月11日 Updating Our Balance Of Payments Monitor - 2019年11月29日 Where To Next For The US Dollar? - 2019年6月7日   脚注 1     フォーリン・エクスチェンジ・ストラテジー特別レポート、"2021 Key Views: Tradeable Themes," 2020年12月4日付を参照。 2     グローバル・フィクスト・インカム・ストラテジー特別レポート、"Who Tapers Next?," 2020年12月04日付を参照。 トレード＆予想 予想サマリー コア・ポートフォリオ タクティカル・トレード 指値注文 クローズ済みトレード

ハイライト グローバル株式は大きな調整に非常に脆弱である。しかし景気循環的には米連邦準備制度（FRB）はインフレの上振れを容認する姿勢を取っており、世界経済は回復している。 中国の財政・信用インパルスが急低下しており、これによりグローバルの景気循環株およびコモディティは下押しを受けやすい。 短期を越えれば、中国の政治的安定の必要性が過度な政策引き締めを防ぐはずだ。リスクは前倒しになっている。 中国の国勢調査は当社のメガテーマの一つを裏付けている：中国の国内政治は不安定であり、ネガティブなサプライズをもたらし得る。 インドの州選挙は大規模なCOVID-19の波の最中に実施されたが、与党が2024年にも依然有利であることを示唆している。これは政策の継続を意味する。 景気循環派の強気バイアスを維持するが、中国が政策ミスを犯した場合には方針転換する準備をしておくこと。 特集 チャート 1 インフレ再浮上 インフレが頭をもたげる インフレが頭をもたげる 今週、米国のコアインフレが強く出たことと、長く眠っていたインフレが再び頭をもたげることへの幅広い懸念を受けて、グローバル市場は震撼した（チャート 1）。 景気循環的には、世界経済の回復に伴い投資家は米国株から国際株へローテーションし、米ドルは下落すると引き続き見ている（チャート 2）。しかしこの見方は、新興国株が先進国株に対してアウトパフォームし始めるべきだということも含んでおり、今年これまでのところはそれが実現していない。新興市場はテクノロジーに偏っており、米国の長期金利上昇に脆弱なだけでなく、中国の景気刺激がピークに達した今、さらに困難に直面している。 チャート 2 株式市場の動揺 株式市場が動揺 株式市場が動揺 チャート 3 世界経済とセンチメントの回復 世界経済とセンチメントは回復しつつある 世界経済とセンチメントは回復しつつある チャート 4 景気循環株対ディフェンシブの揺らぎ グローバルのシクリカル株とディフェンシブ株が揺らいでいる グローバルのシクリカル株とディフェンシブ株が揺らいでいる 我々が頼れる一つの事実は、COVID-19ワクチンの展開が続くことで世界的な成長回復を後押しするという点である（チャート 3）。米ドルもそれを示唆している。ドルは第1四半期に米国の相対的成長優位で反発したが、その後は下落に転じている。ドル安はディフェンシブに対して景気循環株にとってポジティブだが、景気循環株は短期的にはリフレーショントレードが過熱していることを示している（チャート 4）。 中国の成長が今や重要な焦点になる。中国の政策ミスは強気の景気循環見通しを覆すだろう。中国の金融・財政政策の引き締めは、今年我々が強調してきた主要なグローバルな政策リスクであり、今まさに顕在化している。しかし我々は引き締めの制約も指摘してきた。現時点で中国は我々のベンチマークによれば過度な引き締めの瀬戸際に立っている。さらなる引き締めが行われれば、我々は本質的によりディフェンシブな見方に転じるだろう。 本レポートではまた、中国の国勢調査の結果と、最新の大波のCOVID-19感染のもとで行われたインドの最近の州選の含意を検討する。我々はまだインドに対する強気見解を変更していないが、注視している。 中国：過度引き締めリスク 中国の問題は、対外貿易依存から内需依存への経済モデルの継続的な変化に起因している。これは習近平国家主席の台頭以前に共産党が採った戦略的決定であり、習はそれを体現し、戦略的ビジョンと米国との対立を通じて強化してきた。 北京の目標は滑らかで安定した移行を管理することだった。2015年の金融混乱や2018-19年の貿易戦争はその目標を危うくしたが、政策当局は最終的に持ちこたえた。そこへCOVID-19が発生し、1970年代以来の本格的な経済縮小をもたらした。中国はウイルスを抑え込み、貿易戦争開始から2021年のピークまでにGDP比13.8%に上る別の大規模な刺激で回復したが、今やさらに困難な移行に直面している。 チャート 5 中国の上昇する貯蓄傾向 中国の貯蓄傾向の高まり 中国の貯蓄傾向の高まり 潜在GDPが鈍化していることを考えると生活水準の改善の必要性は一層切迫している。債務の大幅な増加に鑑みると体系的な金融リスクを抑制する必要性も一層切迫している。米国が中国に対抗する民主諸国の連合を形成している今、経済の多角化の必要性も高まっている。長期預金比率などで測られる中国の家計・企業の「限界貯蓄性向」の急上昇は、国が困難に直面しアニマルスピリッツが抑えられていることの兆候である（チャート 5）。 2018-21年の大規模拡大の後、中国の財政・信用インパルスは低下に転じている。政策当局は昨年以降、緊急的な刺激を引き揚げるシグナルを出しており、その影響はハードデータに現れている。中国のマネー、クレジット、そして財政とクレジットを合わせたインパルスはいずれも、6〜9か月のラグの後に経済成長と相関する。これは中国のマネーとクレジットサイクルや経済活動を測る指標がどれであれ当てはまる（チャート 6Aおよびチャート 6B）。中国の経済モメンタムはピークに達しており、世界がワクチンと経済再開の追い風を享受しているにもかかわらず、今年後半から2022年にかけて世界経済にとって逆風となるだろう。 チャート 6A 中国の財政・信用インパルスが急落 … 中国の財政・信用インパルスが急落… 中国の財政・信用インパルスが急落… チャート 6B … マネー・アンド・クレジットのインパルスも同様に低下 ... マネー・アンド・クレジットのインパルスも同様である ... マネー・アンド・クレジットのインパルスも同様である 財政・信用インパルスのダウンシフトは、特に国内消費向けに中国が輸入するコモディティ、マテリアル、およびその他財の需要の鈍化を予示している（中国の輸出向け製造に投入される部品や中間財の輸入は、世界の回復とともに比較的健全に見える）。このシフトは、スウェーデン株などの中国関連プレイや急騰している金属価格が調整なしに上昇を続けることを困難にするだろう（チャート 7）。投機筋のポジショニングは現時点でコモディティに偏っている。中国とそれが支配する金属市場との乖離は短期的には耐え難いように見える（チャート 8）。 チャート 7 中国のリフレーショントレードはピーク付近 中国のリフレーショントレードはピーク付近 中国のリフレーショントレードはピーク付近 チャート 8 マネーサイクルとコモディティ価格の衝突 マネーサイクルとコモディティ価格の衝突 マネーサイクルとコモディティ価格の衝突 世界的なグリーンや再生可能エネルギーシステムへの移行（すなわち脱炭素化）は銅をはじめ金属にとって強気だが、短期的には中国の需要減を補うことはできないことを、我々のエマージング・マーケッツ・ストラテジーが示している。中国の建設・産業向けの銅の国内需要は世界総需要の約56.5%を占める一方、グリーンエネルギー競争（太陽光パネル、風力発電、電気自動車の生産等）は世界需要の約3.5%にすぎない。 この数値は既存のシステムや構造の再調整やレトロフィット（例：電力網）も見込まれているためグリーン計画をやや過小評価している面はある。しかし要点は、米国および欧州の消費が大幅に増加しても、中国の銅消費が減少すればそれに逆行することだ。特に米国のインフラ計画が早くても2022年まで本格的に始動しないことを考えれば、今後12か月で中国の影響で世界の銅需要は減速するだろう。 中国の政策当局はまだ過度な引き締めを懸念している、あるいは新たに政策を緩和する意思を示したわけではない。4月末の政治局会議は12月の中央経済工作会議や3月の政府活動報告から大きな政策変更を含んでいなかった（表 1）。しかしもし差異があるとすれば、昨年の緊急感をさらに後退させつつも、地方政府幹部を隠れ債務に対して説明責任を負わせるような何らかの仕組みを示唆した点にある。含意は引き続き引き締め的な政策であり、したがって過度の引き締めリスクは依然として大きい。 表 1 中国の最近のマクロ経済政策表明：刺激の縮小 中国は過度な金融引き締めの瀬戸際にある 中国は過度な金融引き締めの瀬戸際にある チャート 9 中国の政策引き締めのベンチマーク 中国の政策引き締めのベンチマーク 中国の政策引き締めのベンチマーク 確かに4月会議の「お茶の葉」は様々に読み取ることができる。4月の声明はマクロ経済政策指針から「必要な政策支援を維持する」という文言を外しており、これは経済への支援を減らすことを意味する可能性がある。しかし同時に、マネーサプライ（M2）とクレジット成長（社会融資総量）を名目GDP成長に合わせるという目標も外れており、これはクレジット成長の新たな上振れを許容するものと見なすこともできる。とはいえ中国人民銀行は第1四半期の金融政策報告書でこのクレジット目標を維持しており、確信は持てない。このルーブリックによれば、中国は我々がリスクを測るために用いる「過度引き締め」の瀬戸際にあることに注意されたい（チャート 9）。 過去20年の中国の政策運営に基づけば、我々は重大な転換点の発表は4月ではなく7月の政治局会議で行われると予想する。したがって4月は先の会合からの大きな変更とは見なしていないし、我々のチャイナ・インベストメント・ストラテジーも同様に見ていない。従って過度な政策引き締めは今後12か月で中国および世界経済に対する現実的なリスクであり、我々の過度引き締めチェックリストはこの点を強調している（表 2）。 表 2 中国の政策引き締めチェックリスト 中国、過度の引き締め寸前 中国、過度の引き締め寸前 中国の財政・信用のダウンシフトは、第20回党大会を控えて進行している。党大会は2022年を通じて行われ、秋に最高指導部（政治局常務委員）の交代で頂点に達する。共産党の100周年に当たる今年7月1日に向けて経済は十分に刺激されているため、政策当局は過剰を防ぐことに集中している。金融リスクの予防、反独占規制、不動産バブルの抑制が当面の命題である。企業および政府の債務不履行や破産の増加は、指導部が経済構造改革と改革を推し進める意志を裏付けており、近年これが確認されている（チャート 10）。 チャート 10 中国における創造的破壊 中国、過度な引き締め寸前 中国、過度な引き締め寸前 投資家は党大会があるからといって指導部が政策を緩和するだろうと想定してはならない。2017年の党大会の前にはむしろその逆のことが起きた。しかし、投資家はまた、中国が重要なイベントの前に自国経済を沈めるほど過度に引き締めるとも安易に想定してはならない。安定が目標となるだろう（2017年や以前の党大会でもそうであったように）──これは現行の引き締めが財政的・経済的にあまりにも痛みを伴う場合には政策緩和がいつか行われることを意味する。政策当局が転換点に達するまでは、中国関連資産は短期的に脆弱である。 ちなみに、第20回党大会の接近は政治的な暗闘や衝撃的な出来事を引き寄せるだろう。最高指導者は通常、党大会前に派閥の勢力を示すために有力なライバルを解任する。政府はまたメディア統制を強化し、事件の周辺で声を上げるか抗議するかもしれない反体制派を取り締まる。しかし2022年はその利害が一層高い。 習主席は当初2022年に退任すると見られていたが、今は退任しない見込みであり、これは少なくとも一部の反対を喚起するだろう。さらに習政権下で中国は三つの歴史的な政策革命を遂げた：強力な指導者モデルを採用し、前二代の集団指導モデルを損なったこと、経済の自給自足を重視して自由化と開放を犠牲にしたこと、そして大国としての地位を強調し米国や同盟国との協調を犠牲にしていることだ。 まとめ：中国の政策引き締めにより、グローバル株式、コモディティ、そして「中国プレイ」は大幅な調整リスクに直面している。当社のベースケースは中国が過度な引き締めを回避するというものだが、最新のマネーおよびクレジットの数値はその見方を変更する閾値に達している。これらの指標がさらに急落すれば見解を変更する必要がある。 中国の消えゆく労働力 最終的に過度な引き締めを抑制する制約の一つは、労働年齢人口の縮小による中国の潜在GDP成長の低下である。中国の第7回国勢調査が今週公表され、国とその経済に影響する深い構造変化を裏付けた。 過去10年の人口増加率は5.4%に鈍化し、1953年の最初の国勢調査以降で最低となった。出生率は2020年に1.3まで下落し、2.1の人口置換水準や2016年に一人っ子政策を緩和した際の目標1.8を下回っている。出生率は世界銀行の推計（2019年で1.7）や日本の数値よりも低い。人口1000人当たりの出生数も減少し、2020年の新生児数は1961年（大飢饉の年）以来の低水準となった。出生率は高所得国の水準に収束しており、経済発展が中国でも出産抑制の同じ効果をもたらしていることを示唆しているが、中国はこれらの国より発展段階が低い。 チャート 11 1990年代の日本より速く減少する中国の労働人口 中国、過度な金融引き締めの瀬戸際に立つ 中国、過度な金融引き締めの瀬戸際に立つ 最年少コホートの比率は16.6%から17.95%に上昇し、最年長コホートは2010年の8.9%から現在13.5%へ上昇、働き手層は75.3%から68.6%に低下した。労働年齢人口は2010年にピークに達し、過去10年で6.79ポイント減少した。対照的に日本の労働年齢人口は1992年にピークを迎え、その後の10年で2.18ポイント低下した（チャート 11）。 言い換えれば、中国は1990年代初頭に日本が経験した人口転換を経験しているが、中国の労働年齢人口はさらに速く減少する可能性がある。中国は日本が達したより低い1人当たり所得水準でこの大規模な社会経済的変化を経験している。 人口動態の課題は中国の社会経済的および政治的システムに圧力をかけるだろう。中国の奇跡は、他のアジアの奇跡と同様に、輸出製造により大量の貯蓄を生み出し、それを国家開発に再投資することを前提としていた。労働年齢人口の減少は経済発展と重なり、長期的には貯蓄率の低下をもたらすだろう。これはチャート 12に示されたように、二つの異なる中国の労働人口の図と国民貯蓄率を並べたものである。扶養比率が上昇するにつれて貯蓄率は低下し、再目的化に使える資金が減少する。資本コストは上昇し、経済構造改革は加速するだろう。 日本の場合、人口変化は1990年の金融危機と全国的な経済行動の変化と同時に起きた。貯蓄率は経済の変化とともに低下したが、生成された貯蓄は依然として投資を上回っており、これは民間需要の不足と大きな債務負担の圧力によるものであった。企業は投資と生産の拡大よりも債務圧縮に注力した（チャート 13）。これらは外部環境が良好だったときに起きたが、中国は地政学的緊張による経済的圧力が高まる文脈で同様の人口問題に直面している。 チャート 12 希少化する中国の労働者 中国の労働者が希少になりつつある 中国の労働者が希少になりつつある チャート 13 高貯蓄が債務拡大を可能にするが、やがて債務が圧倒する 高い貯蓄が借入拡大を促し、債務が耐え難くなるまで続く 高い貯蓄が借入拡大を促し、債務が耐え難くなるまで続く 中国はこれまで破滅的な金融危機や不動産価格の崩壊を回避しており、深刻な流動性の罠に陥る事態は避けている。中国当局は不動産バブルの危険を痛感しており、したがって金融の過剰を防ぎバブル的活動を抑制することに注力している。これが過度の引き締めリスクを重大なものにしている。しかしどちらか一方の誤りはデフレへの滑落を招き得る。習政権は活動が過度に減速したり金融の不安定性が手に負えなくなりそうな時は経済を刺激してきたが、これは難しいバランス行為であり、故に我々は過度引き締めリスクを綿密に監視している。 中国の国勢調査からのその他の注目点は以下の通りである： 二人っ子政策は現時点では成功していない。 COVID-19は出生率に悪影響を与えた可能性はあるが、タイミングの点で出生数を大きく歪めるほどではない。したがってトレンドはパンデミックだけで説明できない。 急速な都市化が続いており、都市化率は64%に達し、2010年から14ポイント上昇した。 政策議論は定年年齢の引き上げ、出産に対する財政的インセンティブの提供、子育てをより手頃にするための各種価格統制（特に不動産バブルの抑制）、および地方からの移住が続く中で中小都市の不動産価格が急落しないようにする措置を強調している。 中国の少数民族人口は総人口の9%を占め、過去10年で9%成長したのに対し、漢民族は91%で5%成長にとどまった。少数民族は一人っ子（二人っ子）政策の免除対象である。しかし、新疆のような自治区では民族間緊張が発生しており、中国の少数民族政策に対する国際的な監視が強まっている。 中国の人口動態上の課題は広く知られているが、最新の国勢調査はその規模を再確認させる。中国の潜在成長率は低下しており、上昇する扶養比率は政府に対する要求を強める社会変化を示している。より大きな財政・社会支出の必要は困難な経済的トレードオフと不人気な政治的決定を必要とするだろう。経済変化と人の移動は地域間および富の格差を深めるだろう。 これらすべての点は、我々の一貫したジオポリティカル・ストラテジーのメガテーマの一つを裏付けている：中国の国内政治リスクは過小評価されている。 まとめ：中国の2020年国勢調査は、中国の上昇する社会経済的・政治的課題の根底にある人口減少を強く裏付けるものである。中国は強力な中央政府を持ち、単一支配政党の下で権力が集約され、近年様々な課題を管理してきた実績はあるが、それでも現在進行中の変化の規模は圧倒的であり、ネガティブな経済的・政治的サプライズを招くだろう。 インド：州選はモディに対する転換点ではない インドで第2波のCOVID-19がピークにあった時期に、5州で選挙が行われた。中でも西ベンガル州の結果が最も重要だった。西ベンガルは大きな州であり、インド国会の議員のほぼ10分の1を占めている。ナレンドラ・モディ首相の与党バラティヤ・ジャナタ党（BJP）は294議席中約70%を獲得するとの目標を公言していた。 実際には、西ベンガルは地域政党であるオール・インディア・トリナムール会議（AITMC）の圧勝となった。AITMCは2期の反イナカム任期に直面していたにもかかわらず、議席数は過去最高を記録した。多くの予測を上回る結果であり、多くの世論調査が予想していなかったことが示された。 投資家はこの重要州でのBJPの敗北をどう受け止めるべきか。これはモディのパンデミック対応への反発か。2024年の総選挙で政権交代や国家政策の変更を予告するものか。そうとは言えない。ここで我々は三つの主要な示唆を挙げる： 示唆その1：BJPの成果は注目に値する チャート 14 インド：西ベンガルで足がかりを得たBJP 中国、過度な引き締めの瀬戸際 中国、過度な引き締めの瀬戸際 BJPは西ベンガルで目標には届かなかったが、この州はBJPの地盤ではない。BJPは英語で言えばヒンディー語圏で自然な支持基盤を持つとされ、西ベンガルは非ヒンディー語圏であり、伝統的にBJPは「外部勢力」と見なされてきた。またこの州は変化を受け入れにくいことで知られている。例えばAITMC以前は左派が34年という記録的な長期政権を維持していた。このような状況下で、BJPが2021年に77議席に増やしたことは注目に値する（2016年は3議席）（チャート 14）。 この成果によりBJPは西ベンガルで主要な野党となった。これはBJPが時間をかければ伝統的な強みを持たない州でも足場を築けることを示している。歴史的に弱い州でこの成果を上げたことは、BJPが依然として無視できない勢力であることの表れだ。 示唆その2：BJPの人気は後退したが、2024年に政権を維持する見込みは依然強い BJPに対する不満はCOVID-19対応の不手際とそれに伴う経済的困窮により高まっているが、国家レベルでBJPに代わる現実的な選択肢は存在しない。 最近の州選は、西ベンガルだけでなく、野党のインド国民会議（INC）がまだ体制を整えていないことを確認した。コングレスは西ベンガルで44議席から0議席に崩壊した。より重要なのは、コングレスが大衆にアピールする内部指導者を任命・選出する必要性と、識別可能な政策アジェンダを策定する必要性という二つの重要課題をまだ解決していない点である。 コングレスの弱さは、BJPの議席数が2019年のピークから減少する可能性があっても、我々の2024年のベースケースは依然としてBJP主導の政権がインドの政権を維持するというものであることを意味する。政策の継続性とある程度の構造改革の可能性がベースケースだ。 示唆その3：インドの地域政党の台頭 過去10年のBJPの台頭は、コングレスと地域政党の議席減少と同時に進んだ。しかし最近の州選は、BJPが地域政党の議席シェアを劇的に圧縮できないことを示している。例えば西ベンガルではBJPは単独で77議席を獲得したが、これはこの州で支配的なAITMCの犠牲になって得たものではない。一方、同月に選挙が行われた別の大州であるタミル・ナードゥでは二大地域政党の間で支配が揺れ続けている。 チャート 15 インド：BJPは2019年にピークを迎えたが2024年にも有力 中国は過度な引き締めの瀬戸際にある 中国は過度な引き締めの瀬戸際にある 2019年の総選挙では地域政党（BJPとコングレスを除く全党）のシェアは約40%から35%に低下した（チャート 15）。2024年の選挙では、BJPのピーク議席数が2019年の高水準から低下することにより、地域政党の議席シェアがやや上昇する可能性がある。 インドの地域政党の今後の台頭は単純な力学に根ざしている。BJPが2024年に二期目の現職となる可能性があるので、全国レベルでBJPに対する代替がない限り、有権者は差分的に地域政党を支持する選択をするだろう。 BJPは2024年に単独最大党として過半数を超える議席を獲得するポジションに留まるだろう。しかし与党が過半数を確保するために地域政党を取り込むシナリオも十分にあり得る。ただし2024年までは長い時間がある。COVID-19とその経済的影響への対応が、BJPが2019年の成果を超えることを難しくするだろう。次の重要な州選は2022年2月に予定されており、インド最大の州ウッタル・プラデーシュで選挙が行われる。ここでの結果は、BJPがパンデミックと経済ショックによる反イナカム効果をいかに緩和できるかを示すだろう。 結論：インドにおけるBJPの人気は揺らいでいるが劇的に崩れたわけではない。BJPは依然として2024年に過半数を超える単独最大政党になる位置にある可能性が高い。したがって当面この新興市場で政権不安は懸念されない。 中国の国内政治リスクとインドの政治的継続性を踏まえ、当面インド向けのトレードを維持する（チャート 16Aおよびチャート 16B）。ただし我々はインド全体のレビューを進めており、今後の特別レポートで顧客に結論を共有する予定である。 チャート 16A 新興国に対してインド債をロングで保有 インド債券を新興国（EM）に対してロングで維持する インド債券を新興国（EM）に対してロングで維持する チャート 16B インドロング／中国ショートを堅持 インドをロング、中国をショートで貫く インドをロング、中国をショートで貫く 投資上の示唆 短期的な安全資産トレードを維持する。天然ガス先物のロングは19.8%の利得でクローズ。 景気循環（12か月）の強気ポジションを維持し、グロースよりバリューを優先する。レアアースを含むコモディティおよび新興市場のロングを維持する。ただし、中国が我々のベンチマークに従って過度の引き締めを行った場合にはこれらのトレードをカットする準備をすること。 当面は新興国同業と比較してインドのローカル通貨建て債をオーバーウェイトし、インド株を中国株に対してロングする。だがインドに対する強気姿勢は精査中である。 チャート 17 テック売りの中で回復するサイバーセキュリティ株 サイバーセキュリティ株がテック株の暴落の中で反発 サイバーセキュリティ株がテック株の暴落の中で反発 サイバーセキュリティ株はロングで保有を継続すべきだが、地政学的「職場復帰」トレードとしてはサイバーよりも航空宇宙・防衛を引き続き好む。先週の一般的なテック売りの中でサイバーセキュリティ株はテックセクターに対して持ち直した。米国で発生した大規模なColonial Pipelineのランサムウェア攻撃は、東海岸の燃料供給の約45%を支える主要ネットワークを一時的に停止させた（チャート 17）。それでも重要インフラに対する攻撃はサイバーセキュリティが長期的なテーマであることを浮き彫りにしており、投資家はエクスポージャーを維持すべきである。サイバー株はワクチン発見以降、テック全体をアウトパフォームしている（チャート 18）。 チャート 18 サイバーセキュリティは構造的テーマである サイバーセキュリティは長期的なテーマである サイバーセキュリティは長期的なテーマである Matt Gertken バイスプレジデント 地政学ストラテジー mattg@bcaresearch.com Yushu Ma リサーチ・アソシエイト yushu.ma@bcaresearch.com Ritika Mankar, CFA 編集者／ストラテジスト Ritika.Mankar@bcaresearch.com

ハイライト IEAの最新予測によれば、2021–22年の期間における世界の発電設備増加のうち、再生可能エネルギーの設備容量が90％を占める見込みです。これは、昨年追加された再生可能エネルギーの発電設備容量が前年同期比で45％増加したこと（COVID-19パンデミック下でも発生した）を受けたものです（今週のチャート）。 再生可能エネルギーと電気自動車（EV）への継続的な投資、および世界経済の回復により、銀行や商社の銅価格予測は1トンあたり約13,000～20,000ドルのレンジに引き上げられつつあり、現在の約10,600ドル/トン（約4.80ドル/ポンド）と比べて高い水準となっています。 これらのより強い金属価格見通しが的中すれば、カーボン回収やサーキュラー利用技術を通じて化石燃料の低炭素利用を延長する投資の魅力が高まるでしょう。 これらの技術への投資は、投資を評価するための明確な世界的参照価格が存在しないため限定的でした。カーボン市場や炭素税がそのような基準を提供すれば投資は加速します。これはカーボン・マーケット・クラブを通じて監視でき、税を公表し徴収する加盟国に取引を限定します。1 特集 IEAの最新の再生可能エネルギーに関するアップデートによれば、昨年の再生可能エネルギーの設備容量増加はほぼ280GWで、前年同期比45％増と1999年以来の最大の伸びでした。2 今年および来年については、再生可能エネルギーが設備容量増加の90％を占めると見込まれており、特に太陽光PVへの投資は約50％増の162GWに達すると予想されています。風力は昨年90％増の114GWにまで成長し、2022年末までに約50％増加する見込みです。 再生可能エネルギーの発電量の増加と電気自動車（EV）への投資の拡大に伴い、バルク（鉄鋼および鉄鉱石）や、銅を先頭とするベースメタルの需要が価格を押し上げるでしょう。これは、2020年末までの4年間で供給の伸びが停滞し物理的な不足が続いた背景のもとで起きています（チャート2）。IEAによれば、2020年9月から2021年3月の期間で鉄鋼および銅価格が40％上昇したことが、太陽光PVモジュール価格上昇の一因となりました。 今週のチャート 再生可能エネルギー設備容量の急増 金属価格の急騰とカーボンキャプチャーの必要性 金属価格の急騰とカーボンキャプチャーの必要性 我々の評価では、銅市場の供給側は今年と来年も不足が続く見込みであり、Wood Mackenzieが想定するように、今後20年間で需要が年率約2％で成長し、鉱山事業者が需要に見合う設備投資（capex）に踏み切らない場合、この傾向は継続する可能性があります。3 チャート2 物理的な赤字が銅の在庫を引き下げる... 現物不足が銅在庫を取り崩す… 現物不足が銅在庫を取り崩す… 銅や、再生可能エネルギーの構築やインフラに必要な他の金属に関するESGリスクは、価格上昇に伴って高まり、コストを押し上げます。4 こうしたコスト上昇とESGリスクの増大は、我々の見解ではカーボン回収やサーキュラーエコノミー技術への投資魅力を高めます。これにより、もし技術が世界をネットゼロの方向へ近づけられるなら、低炭素の化石燃料の利用期間を延長することが可能になります。しかし、政府の政策がこの投資を誘発しない限り—例えば世界的なカーボン取引価格や炭素税を通じて—、これら技術への投資は低迷し続ける可能性が高いでしょう。 カーボン回収技術の果たせなかった約束 カーボン回収・利用・貯留（CCUS）の歴史は、高い期待と達成されない期待の繰り返しでした。気候変動緩和の手段として一般に認識されているものの、その導入は期待ほど速く進んでいません。 低炭素技術は化石燃料に基づく技術に比べてより多くの重要金属を必要とします（チャート3）。コストの問題に加え、再生可能エネルギー移行のために金属採掘が増えれば、採掘に伴うESGリスクも増大します。これについては当社の過去のリサーチで議論しました。5 Wood Mackenzieによれば、低炭素世界への移行を支えるのに必要な金属供給のために、鉱業会社は今後15年でほぼ1.7兆ドルの投資を行う必要があると推計しています。6 チャート3 低炭素技術は金属集約的である 金属価格の急騰とカーボン・キャプチャーの意義 金属価格の急騰とカーボン・キャプチャーの意義 こうした金属に関する差し迫った物理的需要を考えると、市場が現在織り込んでいるよりも長い期間、化石燃料が橋渡しとして使われるか、あるいは炭素をハイドロカーボンから除去する技術の成功度合いに応じて将来の一部として使われ続ける可能性が高いと言えます。そうであるならば、移行期において化石燃料を使い続けつつその環境影響を軽減するには、CO2やその他の温室効果ガス（GHG）排出を低減するための高度に焦点を絞った技術が必要になります。 そこでCCUS技術です：この技術は、化石燃料やバイオマスを用いて現代社会に必要なエネルギーを生産する過程で発生するCO2を捕捉します。現在の形態では、CO2は圧縮されて輸送されるか、地質構造や海洋貯留層に貯留されます。これを増進回収（EOR）に利用して、炭化水素を含む貯留層にCO2を注入することで採取が困難な油を抽出することも可能です。7 CCUS投資の余地 CCUSへの投資支出は増加しており、この技術を利用または実証する予定の施設数も増えています。IEAの『Energy Technology Perspectives 2020』の2020年版では、2017年以降に30件の新しい統合型CCUS施設が発表され、主に米国や欧州など先進国で進められているが、一部の新興国でも計画があると指摘しています。2020年時点で計画が高度な段階にあるプロジェクトは合計で270億ドルに相当し、2017年時点の計画投資の2倍以上となっています（チャート4）。 パリ協定の多くの目的の一つは、21世紀後半に人工的な排出と温室効果ガス（GHG）吸収（シンク）による除去との間でバランスを取ることです。実務的には、多くの国、特に新興国はこの期間中に開発のために化石燃料を使用し続ける必要があるでしょう（チャート5）。8 チャート4 ここまでのカーボン回収プロジェクト 急騰する金属価格とカーボンキャプチャーの必要性 急騰する金属価格とカーボンキャプチャーの必要性 チャート5 新興国の開発には化石燃料エネルギーが必要になる 高騰する金属価格とカーボン・キャプチャー導入の必要性 高騰する金属価格とカーボン・キャプチャー導入の必要性 エネルギー分野におけるCCUS 石炭に比べてGHG排出が少ない燃料、すなわち石炭のCO2の半分程度しか排出しない天然ガスは、グリーン発電への橋渡し（ブリッジ）として有効に使うことができます（チャート6）。 チャート6 天然ガスはブリッジ燃料として引き続き魅力的である 金属価格の急騰とカーボン・キャプチャ導入の必要性 金属価格の急騰とカーボン・キャプチャ導入の必要性 天然ガス中のCO2は、パイプライン品質のガスやLNGとして販売される前に除去する必要があります。通常、このCO2は大気中に放出されますが、CCUS技術を用いることで地質貯留層へ再注入し、増進回収（EOR）に利用することができます。このため、世界最大のLNG輸出国である米国のLNG企業は、より環境に配慮した事業運営を目指してCCUS技術への投資を検討しています。9 CCUSはまた、天然ガスや石炭を用いて低コストの水素（いわゆるブルー水素）を生産するためにも利用できます。これは再生可能エネルギー由来の電力を用いる電気分解による「グリーン水素」よりもコストが低く、ブルー水素の低コスト化は新興国にクリーンな水素を普及させ、脱炭素化に向けた新たな利用経路を開く可能性があります。 その他産業におけるCCUSの価値 CCUS技術は既存の発電所や産業プラントに後付けで導入することが可能であり、IEAによれば、そうでなければ2050年に約80億トンのCO2を排出し続ける可能性があるとされ、これは2020年のエネルギー部門の年間排出量のおよそ4分の1に相当します。 化石燃料を燃焼する発電所のうち、石炭火力発電は最大のCO2課題を抱えています。排出の大部分は中国やその他のアジア新興国から生じており、平均設備年齢は20年未満です。米国規制委員会協会によれば石炭火力発電所の平均寿命は40年であるため、これらの発電所は残存稼働年数が長く、2050年まで稼働し続ける可能性があります。既存の発電所や産業プラントを廃止したり用途変更したりする代替手段として、CCUSは唯一の選択肢となり得ます。 IEAは、ネットゼロ炭素排出を達成するにはCCUSが不可欠であると考えています。同機関のSustainable Development Scenarioでは、エネルギー部門からの世界のCO2排出が2070年までにネットゼロに減少するシナリオにおいて、CCUSは累積排出削減の15％を占めます。もし世界が2050年までにネットゼロを達成する必要がある場合、ほぼ50％多いCCUSの導入が必要となります。10 適切に実装・拡大されれば、CCUSは産業が石油、ガス、石炭を使い続けつつネットゼロ目標を達成することを可能にし、中期的には化石燃料需要を後押しする可能性があります。これは特に新興国の開発にとって重要です。 なぜCCUSはもっと進んでいないのか？何ができるか？ CCUSが広く使われていない主な理由はコストです。 現在、CO2を捕捉するコストはCO2濃度に基づいて変動し、直接空気回収（Direct Air Capture）が最も高価です（チャート7）。こうした高コストのために、CCUSは商業的に成立していません。 ただし、同じ議論は再生可能エネルギー導入に対してもかつては成り立ちました。かつて再生可能エネルギーの平準化発電コストは高価でしたが、政府補助金による拡大とスケールアップにより、ムーアの法則的なコスト低下曲線に沿ってコストは下がりました。Lazard Ltd.が報告する技術横断比較が可能な太陽光発電の平準化発電コストでは、2009年から2019年にかけて発電コストが89％低下し、359ドル/MWhから40ドル/MWhになりました（チャート8）。この学習曲線は、太陽光技術の導入を促進した政府補助金によって可能になりました。 チャート7 CCUSは高コストになり得る 金属価格の急騰とカーボンキャプチャーの必要性 金属価格の急騰とカーボンキャプチャーの必要性 チャート8 太陽光と同様に補助金がCCUSを支援し得る 補助金は、太陽光発電で行われたのと同様にCCUSを支援できる 補助金は、太陽光発電で行われたのと同様にCCUSを支援できる CCUS技術のコストは低下しています。例えば、2019年にGlobal CCS Instituteは、カナダのBoundary Damで2014年に稼働したCCSユニットでの捕捉コストが1トン当たり100ドルであったと報告しました。3年後に建設された米国のPetra Novaで、改良技術を用いた捕捉コストは1トン当たり65ドルでした。いずれも石炭火力発電所です。報告書はまた、Boundary DamやPetra Novaと同様のCCS技術を用いて2024–28年に稼働開始予定の石炭火力発電所では、学習曲線の進展、研究、規模の経済による資本コスト低下、デジタル化などにより1トン当たり約43ドルになると見込まれていると指摘しました。これらのコスト削減の共通点の一つは、企業がCCUSにより多く投資し、この技術に慣れ親しむ必要があるという点です。 再生可能エネルギーの事例と同様に、政府補助金はCCUSの運用コストの参入障壁を下げ、この技術の改良への参加を促します。初期の先駆的なCCUSは高価ですが、資本支援や税額控除といった補助によりCCUSの実装と研究は増加します。Boundary DamとPetra Novaは政府補助金の恩恵を受けた例であり、CCSユニット建設時にそれぞれカナダ政府および米国の機関から1億7,000万ドルと2億ドルの支援を受けました。 米国はまた45Q税額控除制度を導入しており、貯留されたCO2に対しては1トン当たり50ドル、増進回収のような用途で使用されたCO2に対しては1トン当たり35ドルを施設に支払います。Global CCS Instituteによれば、2019年末時点で米国に追加された8件の新しいCCUSプロジェクトのうち4件は、45Qの存在を主要な推進要因として挙げていました。 カーボン市場と炭素税の活用 2005年に導入されたEUの排出権取引制度（ETS）は、企業に市場の力を使って排出削減を促す革新的な政策の一例です。これらの市場で計測される炭素価格は、これまで記録されてこなかった負の外部性に具体的な価値を与えます。ETSの欠点は、長期の需給分析や計画を複雑にする政策変更に左右されるEUの環境政策実施に依存している点です。例えば、最近の目標引き上げでは2030年までに温室効果ガス排出を少なくとも55％削減することが掲げられました。 排出権の政策主導トレードに代わる手段としては、政府が課し徴収する排出量当たりの炭素税があります。これにより、鉱業で使用されるような化石燃料を用いる技術のコストが上昇し、再生可能エネルギー移行に必要なバルクやベースメタルの供給を増やすための技術を供給・使用する企業にCCUSなどでCO2を削減するインセンティブが与えられます。 ETS市場と政府によるCO2課税は、ウィリアム・ノードハウス（2018年ノーベル経済学賞受賞者）が提唱した技術であるカーボン・マーケット・クラブを形成することができます。これにより、加盟国がパリ協定で求められる実際の削減を取引や税制で示し参加していることを実証できる国に取引を限定できます。11 グリーンエネルギー移行が勢いを増し、各国がネットゼロ政策を実施するにつれて、炭素の価格は上昇するでしょう。炭素価格が上がると、企業の排出に関連するコスト負担が増加します。市場参加者が炭素価格が記録的水準に達した後も上昇を続けると見込む中で、EUで事業を行う企業にとってCCUS技術を採用するインセンティブは強まり、炭素税に直面する企業にとっても同様に導入の動機が高まります。12 要点： 緑の金属価格の急騰、設備投資の不足、そして低炭素未来のために採掘される金属に伴うESGリスクを踏まえると、我々は市場の織り込み以上に化石燃料が低炭素社会への移行で大きな役割を果たすと予想します。各国が気候目標を達成しつつ化石燃料を利用できるようにするためには、CCUS技術の利用が重要です。CCUSの普及を高めるためには、再生可能エネルギーの事例にならい、需要が確立するまで政府がこの技術を補助する必要があります。また、ETSや炭素税の導入促進も行動を触発するために必要です。   Robert P. Ryan チーフ・コモディティ＆エネルギー・ストラテジスト rryan@bcaresearch.com Ashwin Shyam リサーチ・アソシエイト コモディティ＆エネルギー戦略 ashwin.shyam@bcaresearch.com     コモディティ概況 エネルギー： 強気 記事作成時点で、ブレント原油価格は70ドル/バレルの水準に迫っていました。これはIEAが2021年後半の強い需要回復を評価したことを受けた動きです（チャート9）。IEAは2021年前半の需要増加見通しを27万b/d引き下げましたが、インドやOECDアメリカ、欧州でのCOVID-19による需要減少が主因であり、後半の見積りは維持しており、今年の総需要増は540万b/dとしています。EIAも今年の需要増を540万b/d、来年は370万b/dと見込んでいます。OPECは2021年通年の需要増を600万b/dのまま維持しました。OPEC 2.0は6月1日に再び会合し、我々の見立てでは市場により多くのサイドライン生産を戻すことを検討するでしょう。来週のレポートで需給バランスと価格見通しを更新する予定です。 ベースメタル： 強気 記事作成時点で、CME/COMEXのスポット銅価格はおおむね4.80ドル/ポンド付近で推移していました。チリでの増税の脅威（そのような税を求める法案が議会を通過しつつあること）、鉱山労働者のストライキの可能性、そして採鉱で使用される硫酸の不足（パンデミックによる製油所の稼働減少が原因で世界的に硫黄供給が減少したことによる）などが、ブルームバーグによれば銅を強く買われた状態にしています。当社の12月限COMEX銅の目標は5ドル/ポンド（LMEで約11,000ドル/トン）です。物理的な供給不足が在庫取り崩しを強い続け、金利構造をバックワーディテートさせると予想しているため、当社は2022年カレンダー物のCOMEX銅をロング、2023年をショートのポジションを継続しています。 貴金属： 強気 水曜日の米国のCPIデータは、4月の総合インフレ率が前年同月比で4.2％上昇したことを示しました。これは2008年以来の高水準ですが、この上昇はベース効果（昨年の同時期にパンデミックで物価が下落していたため）による部分もあると考えられます。物価上昇は金をインフレヘッジとしての需要を高めますが、もしこのデータを受けてFRBが金利を引き上げれば米ドル高となり、金価格にはマイナスに働きます（チャート10）。ただし我々はFRBがこの報告で指針を急激に転換するとは予想しておらず、中銀がこの一時的な上振れと扱うと見ています。昨日の終値時点でCOMEXの金は1,835.9ドル/オンスで取引されていました。 農産物／ソフト商品： 中立 記事作成時点で、シカゴ大豆市場は水曜日に発表予定のWorld Agriculture Supply and Demand Estimates（WASDE）レポートを前に上昇していました。先物の期近は約16.70ドル/ブッシェルで、日中で2％上昇していました。今月のWASDEには、2021/22作付年に対するUSDAの初の需要見積りが含まれ、需要の強まりにより供給が引き締まるとの見通しが市場で予想されています。 チャート9 ブレント価格が上昇中 ブレント価格が上昇中 チャート10 新型コロナの不確実性が金の需要を押し上げる可能性がある 新型コロナの不確実性が金の需要を押し上げる可能性がある   脚注 1     詳細はWorld Bankが2016年7月に公表したカーボン・マーケット・クラブと新パリ体制を参照してください。こうした技術の知的および計算の枠組みは、2018年ノーベル経済学賞受賞者のウィリアム・ノードハウスによって開発されました。 2     今週IEAが公表した再生可能エネルギー市場アップデート、2021年および2022年の見通し.pdfを参照してください。 3    WoodMacは「追加の大規模な投資がない限り、2024年以降生産は減少する。需要の伸びと相まって、この生産減少は理論的には2040年までに約16Mtの不足をもたらすだろう」と指摘しています。コンサルタントは、この期間の銅需要を満たすためにさらに3,250億～5,000億ドル以上の投資が必要になると見積もっています。詳細は供給成長の欠如は銅業界にしっぺ返しをもたらすか？（woodmac.com、2021年3月23日）をご覧ください。 4    当社が2021年4月29日に公表した需要拡大に伴う再生可能エネルギーのESGリスクの増大を参照してください。ces.bcaresearch.comで入手可能です。 5    脚注4を参照してください。 6    Reutersが公表した低炭素世界には1.7兆ドルの鉱業投資が必要をご覧ください。 7     この方法は石油生産を増加させるために用いられます。炭化水素の特性を変え、貯留層圧力を回復し、貯留層内での油の置換を促進します。EORを用いることで、石油会社は貯留層中の原油原始埋蔵量の30％から60％を回収することができます。詳細は米国エネルギー省が公表する増進回収をご覧ください。 8    ReutersのコラムCO2排出制限と経済開発を参照してください。 9    World Oilの記事米国のLNG業者はグリーンなイメージ向上のためにカーボン回収を唱えるをご覧ください。 10   IEAのカーボン回収・利用・貯留に関する特別報告（Energy Technology Perspectives 2020の一部）をご覧ください。 11    上の脚注1を参照してください。 12    Financial Timesの記事EUで汚染のコストが急騰、炭素価格が記録的な€50に達するを参照してください。 投資見解とテーマ 戦略的推奨事項 タクティカル・トレード コモディティ価格および取引参考表 2021年にクローズした取引 クローズした取引の要約 より高いインフレが到来 より高いインフレが到来

Highlights Global Tapering: The Bank of England has joined the Bank of Canada as central banks tapering the pace of bond buying. Markets are now trying to sort out who is next and concluding that it will not be the Federal Reserve, with US employment still well below the pre-pandemic peak. US Treasury yields will continue trading sideways until there is greater clarity on the pace of US labor market improvement, especially after the big downside miss in the April jobs report. US Treasury Curve: We are adding a new recommended US butterfly trade to our Tactical Overlay portfolio, going long the 5-year bullet and short the 2/30 barbell using US Treasury futures. This trade should benefit with US Treasury curve steepening overshooting the pace of past cycles, while offering attractive carry if persistent Fed dovishness slows the cyclical transition to a bear-flattening curve regime. Feature Heading into 2021, one of our key investment themes for the year was that no major central bank would shift to a less dovish monetary policy stance before the Fed. Not even five months into the year, our theme has already been proven incorrect. Last week, the Bank of England (BoE) announced a slower pace of its asset purchases, following a similar tapering decision by the Bank of Canada (BoC) last month. Chart of the WeekUS Jobs Recovery Lagging, Despite Vaccine Success We had assumed that no central bank could tolerate the currency strength that would inevitably occur by tapering ahead of the Fed. That was clearly not the case in Canada, and the Canadian dollar has already appreciated 4.6% versus the greenback since the BoC taper announcement April 21. The British pound also rallied solidly against both the US dollar and euro immediately after the BoE taper announcement last week. Markets are beginning to speculate on future taper candidates, like the Reserve Bank of New Zealand (RBNZ), with the New Zealand dollar being one of the strongest currencies in the G10 versus the US dollar since the end of March (+4.4%). Investors had been debating the possibility that the Fed could begin tapering sometime in the second half of 2020, largely based on what has to date been a successful US vaccination campaign. Yet while that led to optimism that the US economy can quickly reopen and return to normal, the fact remains that the recovery in US employment from the COVID shock has lagged other major economies (Chart of the Week). The big downside miss on the April US payrolls report highlights how the Fed can be patient before joining the tapering club. US Treasury yields are likely to continue trading sideways, and the US dollar will trade soft, until markets can sort out the true state of US labor demand versus supply. Which Central Bank Could Follow The BoC And BoE? Back in March, we published a report that discussed what we called the “pecking order of global liftoff”.1 We looked at how interest rate markets were pricing in an increasingly diverse path out of the coordinated global monetary easing enacted last year during the COVID recession (Chart 2). We looked at both the timing of “liftoff” (the first rate hike) and the pace of hikes afterward to the end of 2024. We then ranked the countries by the market-implied timing of liftoff. Chart 2Sorting Out The Relative Hawks & Doves Among Global CBs At the time, overnight index swap (OIS) curves were discounting the earliest liftoff from the RBNZ (June 2022) and BoC (August 2022). The Fed was expected to hike in January 2023, followed by the BoE in June 2023 and Reserve Bank of Australia (RBA) in July 2023. The European Central Bank (ECB) and Bank of Japan (BoJ) were the laggards, with no rate hiked discounted until September 2023 and February 2025, respectively. In terms of the pace of rate hikes after liftoff through 2024, our list was broken into two groups. The more aggressive central banks were expected to be the BoC (+175bps), RBA (+156bps), RBNZ (+140bps) and the Fed (+139bps). Much smaller amounts of rate hikes were anticipated from the BoE (+63bps), ECB (+25bps) and BoJ (+9bps). In the two months since our March report, the market timing of liftoff, and the pace of subsequent hikes, has shifted for all those countries (Table 1). The BoC is now expected to move in September 2022, ahead of the RBNZ (October 2022). In 2023, the Fed is now priced for liftoff in March 2023, followed by the BoE and RBA (both in July 2023). The ECB liftoff date is little changed (now August 2023), while the market has dramatically pushed out the timing of any BoJ hike (now November 2025). The cumulative rate hikes through 2024 are moderately lower for all countries except Australia (a reduction in total tightening of 56bps). Table 1The Fed Is Sliding Down The “Pecking Order Of Liftoff” List What is interesting about these changes is that the market has pulled forward the timing of liftoff for the BoE and RBA, while pushing it out for the BoC, RBNZ, BoJ and, most importantly, the Fed. The Fed is now drifting down the “pecking order” for liftoff, expected to lift rates only a couple of months before the BoE or RBA. This is a major change from previous monetary policy cycles, when the Fed would typically be a first mover when it comes to tightening policy. Chart 3The Momentum Of Global QE Has Already Been Slowing While the BoC and BoE decisions to taper quantitative easing (QE) have garnered the headlines, the pace of global central bank balance sheet expansion had already peaked at the start of 2021 (Chart 3). The pace has slowed most dramatically in Canada and the US, but this was a result of certain emergency programs expiring – most notably the Fed’s corporate bond buying vehicles late last year and the BoC’s short-term repo facilities more recently. Greater financial market stability was the reason cited to end those programs, while still leaving government bond QE buying in place unchanged. The year-over-year pace of global QE was set to slow, simply from less favorable comparisons to 2020 after the surge in central bank balance sheet expansion last year. Yet now we are starting to see actual tapering of government bond purchases from some central banks. Is such “early tightening” warranted? Back in that same March report where we discussed the order of global liftoff, we gave our assessment of the most important factors that could drive central banks to consider a shift to a less dovish stance (like tapering). For the BoC, we cited booming house prices and robust business confidence as reasons the BoC could turn less dovish sooner (Chart 4). For the BoE, we noted a sharper-than-expected recovery in domestic investment and consumer spending, as the locked-down UK economy reopens, as reasons why the BoE could begin to tweak its policy settings. For both central banks, all those indicators were mentioned as factors leading to their decision to taper. For the Fed, we determined that rising inflation expectations and increasing labor market tightness would both be required for the Fed to turn less dovish. Only inflation expectations have reached that goal, with the US Employment/Population ratio still well below the pre-pandemic peak (Chart 5). For the RBA, we looked solely at realized inflation measures, as the RBA has explicitly noted that Australian wage growth must rise sustainably towards 3% - nearly double current levels - before realized CPI inflation could return to the 2-3% target range. For both the Fed and RBA, the necessary conditions for a change in current policy settings have not yet been met. Chart 4What The More Hawkish CBs Are Watching Chart 5What The More Dovish CBs Are Watching For the ECB, we noted that realized inflation (and the ECB’s inflation forecasts), along with the Italy-Germany government bond spread as a measure of financial conditions, were the most important indicators to watch before the ECB could consider any move to taper its QE programs (Chart 6). Italian spreads have widened a bit in recent months, while the latest set of ECB economic forecasts still call for headline euro area inflation to remain well south of the 2% target out to 2023. For the BoJ, we simply cited a rise in realized inflation as the only possible development that could lead to a BoJ taper. The BoJ now forecasts that Japanese inflation will not reach the 2% central bank target until at least 2024. So for both the ECB and BoJ, the conditions do not warrant any imminent tapering of bond buying. Chart 6What The Most Dovish CBs Are Watching As another way to determine who could taper next, we turn to our Central Bank Monitors, which are designed to measure the pressure on policymakers to ease or tighten monetary setting. All the Monitors have responded to the recovery in global growth and inflation, along with the easing of financial conditions implied by booming markets, over the past year. Yet only the RBA Monitor is calling for tightening (Chart 7), indicating that the RBA’s current focus on only wages and realized inflation is a departure from their behavior in the past. The Fed and BoE Monitors have risen to the zero line, suggesting no further pressure to ease policy but no tightening is needed either. The ECB, BoJ and RBNZ Monitors are all close, but just below, the zero line, suggesting diminishing need for more monetary stimulus (Chart 8). Chart 7Bond Yields Have Moved Ahead Of Our CB Monitors Chart 8Yields Overshooting Tightening Pressures Here Too Based on our assessment of the above indicators, we judge the RBNZ to be the next central bank most likely to taper, sometime in the 2nd half of 2021. We still see the Fed starting to signal tapering later this year, but with actual slowing of US Treasury (and Agency MBS) purchases not occurring until early 2022. The year-over-year momentum of bond yields correlates strongly with the Central Bank Monitors. The rise in global bond yields seen over the past year has exceeded the pace implied by the Monitors. This is unsurprising given how rapidly the global economy has recovered from pandemic-fueled recession in 2020. Supply chain disruptions and surging commodity prices have also given a lift to bond yields via rising inflation expectations, even as central banks have promised to keep rates on hold for at least the next couple of years. Yet purely from a monetary policy perspective, the surge in global bond yields looks to have gone a bit too far, too fast. Bottom Line: Markets are now trying to sort out who will taper next after the BoC and BoE, and have concluded that it will not be the Federal Reserve, with US employment still well below the pre-pandemic peak. US Treasury yields will continue trading sideways until there is greater clarity on the pace of US labor market improvement, especially after the big downside miss in the April jobs report. Bond yields in other developed markets appear to have overshot economic momentum, and a period of consolidation is needed before yields can begin moving higher again. US Treasury Curve: How Much Steepening Left? Chart 9A Pause In The UST Bear-Steepening Trend For most of the past year, the primary trend in the US Treasury curve has been one of bear steepening. Longer maturity yields have borne the brunt of the upward pressure stemming from the rapid recovery in US (and global) economic growth from the depths of the 2020 COVID-19 recession. In recent weeks, however, the surge in longer-maturity Treasury yields has stalled, as have the immediate steepening pressures (Chart 9). Purely from a fundamental economic perspective, a steepening Treasury curve is an expected result of the reflationary mix of growth, inflation and monetary policy currently at work in the US. For example, since the 2020 lows, 5-year/5-year forward inflation expectations from the TIPS market have risen 143bps while the ISM manufacturing index surged from a low of 41 to a high of 65 in March of this year (Chart 10). Combine that with the Fed cutting rates to 0% last year, while promising to keep rates unchanged through 2023 and reinforcing that commitment through QE, and it is no surprise to see a steeper US Treasury curve. Chart 10UST Curve Steepening Has Been Driven By Reflation Yet even despite these obvious steepening pressures, the pace of the Treasury curve steepening does seem to be a bit rapid compared to history. In Chart 11, we show a “cycle-on-cycle” analysis, comparing the slope of various US Treasury curve segments (2-year versus 5-year, 5-year versus 10-year, 10-year versus 30-year) to the average of the previous five US business cycles, dating back to the 1970s. The curves are lined up to the start date of the previous recession, with the vertical line in the chart representing that date. Thus, this chart allows us to see how the Treasury curve evolved heading into, and coming out of, economic downturns. Chart 11 shows that the current 2-year/5-year curve, with a steepness of 63bps, is in line with past steepening moves coming out of recession. For the curve segments at longer maturities, the pace of steepening has been much more rapid than in the past. In fact, the current 5-year/10-year slope of 82bps is already above the average past peak level, as is the 10-year/30-year curve of 72bps. If we do the same cycle-on-cycle analysis for the three previous US recessions dating back to 1990, the current curve slopes are more in line with levels seen one year into the economic expansion (Chart 12). During those previous cycles, the curve steepening trend ended around two years into the expansion. This suggests that the current curve steepening could continue into 2022, except for one major difference – the Fed cut rates to 0% very rapidly last year, far faster than in the previous easing cycles. This suggests that additional curve steepening from current levels can only occur through a surge in US inflation. Chart 11Current UST Steepening Has Moved Fast Compared To Past Cycles Chart 12Can More UST Curve Steepening Occur With A 0% Funds Rate? The slope of the Treasury curve is typically correlated to the level of the nominal fed funds rate, but is even more strongly correlated to the funds rate minus actual inflation, or the real fed funds rate. When the real funds rate is below the natural real rate of interest, a.k.a. r-star, the Treasury curve has historically exhibited its strongest steepening trend. That can be seen in Chart 13, where we show the real fed funds rate (adjusted by US core CPI inflation) compared to the New York Fed’s estimate of r-star. The gap between the two series is shown in the bottom panel, correlating very strongly to the 2-year/30-year Treasury curve slope. Chart 13Curve Steepening Results When Real Rates Are Below R* With the nominal funds rate at zero, that gap between r-star and the real fed funds rate can only widen in a fashion that would support more curve steepening if a) realized US inflation moves higher or b) r-star moves higher. Both outcomes are possible as the US economic recovery, fueled by expanding vaccinations and fiscal stimulus. Both real rates and r-star are much lower in the current cycle than in previous economic recoveries, although the r-star/real funds rate gap appears to be following a more typical path that suggests potential additional steepening pressure (Chart 14). The wild card in this analysis is the Fed itself. If US economic growth and inflation evolve in way that makes it more likely the Fed would have to begin tapering QE and, eventually, signal future rate hikes, the Treasury curve may shift to a more typical bear-flattening trend seen during tightening cycles. We saw an example of that after the release of the March US employment report, where over a million jobs were created in a single month, causing 5-year Treasury yields to jump higher than longer-maturity Treasuries (i.e. curve flattening). Looking ahead, it appears that the US yield curve is more likely to slowly transition to a bear-flattening/bull-steepening regime than continue the bear-steepening/bull-flattening: trend of the past twelve months. One way to position for this is to enter into butterfly curve trades that offer attractive carry or valuation. For that, we turn to our Treasury curve valuation models. We have been recommending a Treasury yield curve trade in our Tactical Overlay portfolio on page 19, going long a 7-year bullet versus going short a 5-year/10-year barbell (Chart 15). This barbell is now very cheap on our models, which measure value by regressing the butterfly spread on the underlying slope of the curve. In this case, the spread between the 5/7/10 butterfly is unusually wide compared to the slope of the 5/10 Treasury curve. According to our model, this butterfly spread discounts nearly 100bps of additional 5/10 steepening, an excessive amount compared to past cycles. Chart 14R* - Real Funds Rate Gap Below Previous Cyclical Peaks Chart 15Maintain Our Current 5/7/10 UST Butterfly Trade While the valuation is attractive on the 5/7/10 butterfly (Table 2), the carry on this position is a modest 12bps. A butterfly with more attractive carry is the 2/5/30 butterfly. Table 2US Butterfly Strategy Valuation: Standardized Residuals Table 3US Butterfly Strategies: Carry Chart 16Enter A New 2/5/30 UST Butterfly Trade This butterfly has a neutral valuation (Chart 16) on our model, but offers 35bps of carry - the most attractive among all butterflies involving a 5-year bullet (Table 3). With US Treasury yields, and the Treasury curve slope, likely to remain rangebound for the next few months, going for higher carry trades is an attractive strategy – particularly if used in conjunction with a below-benchmark duration stance, which we still advocate. The 2/5/30 butterfly represents an attractive near-term hedge to that more defensive duration posture. Bottom Line: We are adding a new recommended US Treasury butterfly trade to our Tactical Overlay portfolio, going long the 5-year bullet and short the 2/30 barbell. This trade should benefit with US Treasury curve steepening overshooting the pace of past cycles, while offering attractive carry if persistent Fed dovishness slows the cyclical transition to a bear-flattening curve regime.   Robert Robis, CFA Chief Fixed Income Strategist rrobis@bcaresearch.com Footnotes 1 Please see BCA Research Global Fixed Income Strategy Report, "Harder, Better, Faster, Stronger", dated March 16, 2021, available at gfis.bcaresearch.com. Recommendations The GFIS Recommended Portfolio Vs. The Custom Benchmark Index ​​​​​​​ Duration Regional Allocation Spread Product Tactical Trades Yields & Returns Global Bond Yields Historical Returns

特別レポート

Highlights The Scottish parliamentary election does not present a near-term risk of a second referendum on Scottish independence. Independence is possible down the road but very unlikely due to a host of economic and geopolitical challenges still relevant in the twenty-first century. Book gains on long CHF-GBP. Go long FTSE 100 versus developed markets excluding the United States. Feature British equities have underperformed developed markets over the past decade – even if we exclude the market-leading United States (Chart 1). The British equity market is heavily concentrated in cyclical sectors like financials and materials and has a low concentration in information technology and communications services. As such the bourse has sprung to life since the advent of the COVID-19 vaccine and the prospect of a government-stimulated global growth recovery. In keeping with our strategic preference for value over growth we also look constructively at British equities. A potential source of geopolitical and political risk is Britain’s ongoing constitutional crisis, which flared up with the failed Scottish independence referendum in 2014 and the successful referendum to leave the EU in 2016. Tensions within the UK and between the UK and EU are part of the same problem – a loss of popular confidence and trust in the current nation-state and governing institutions in the aftermath of hyper-globalization.1 This constitutional crisis added insult to injury for UK stocks by jacking up policy uncertainty and undermining the attractiveness of domestic-oriented UK companies that suffered from trade disruptions with the European Union. Chart 1UK Referendums Added Insult To Injury Chart 2Post-Brexit Trading Range For GBP-EUR Now the COVID-19 pandemic and its aftermath have changed the global scene entirely and Brexit is no longer Britain’s chief concern. But there is still a lingering question over Scotland’s status. The Scottish question has recently weighed on the British pound and reinforced the new trading range for the GBP-EUR exchange rate in the aftermath of a “hard” exit from the European Union (Chart 2). Scotland voted for a new parliament on May 6 and the preliminary results are coming in as we go to press. The pro-independence Scottish National Party is still the most popular party and even if it falls short of a majority, as online betting markets expect, it has pro-independence allies with which it could form a coalition (Chart 3). Its leader, Scottish First Minister Nicola Sturgeon, has promised to pursue a second popular referendum on seceding from the United Kingdom by 2023. Chart 3Betting Markets Doubt Single-Party Majority For SNP British Prime Minister Boris Johnson, backed by a strong Conservative Party parliamentary majority, has vowed not to allow a second referendum, arguing that the 2014 plebiscite was supposed to lay the question to rest for a while. Scottish opinion in favor of secession stands at 43.6% today, right near the 44.7% that nationalists achieved in 2014 (Chart 4). Chart 4Support For Independence Ticks Down, Still Shy Of Majority Our takeaway is to fade the Scottish risk. Book gains on our long CHF-GBP tactical trade. Go long British equities relative to DM-ex-US on the expectation of global economic normalization, which is beneficially for the outwardly oriented British multinationals that dominate the British bourse. Does Scotland Have Grand Strategy? The history of Scotland is marked by internal differences that prevent it from achieving unity and independence. Even in the twenty-first century, when many factors have coalesced to make Scottish independence more likely than at any time since the eighteenth century, the 2014 referendum produced a 10% gap in favor of remaining in the United Kingdom. This majority is all the more compelling when viewed from the perspective of geography because cross-regional support for the union is clear (Map 1). Map 1Scottish Independence Referendum Result, 2014 Why is Scotland always divided? Because it is trapped by the sea and adjacent to a greater power, England. England is usually strong enough to keep Scotland from consolidating power and asserting control over its maritime and land borders. Specifically, Scotland contains a small population (at 5.5 million today) and small economic base (GBP 155 billion in economic output at the end of 2022) dispersed over an inconvenient geography. The low-lying plains around the Firth of Forth that form the historic core of Scotland share a porous border with England. The highlands provide a retreat for Scottish forces during times of conflict, which makes it extremely difficult for southern forces, whether Roman or Anglo-Saxon, to conquer Scotland. But the highlands are equally hard for any standalone Scottish state to rule. Meanwhile the western isles are even more remote from the seat of Scottish power and vulnerable to foreign maritime powers. Since England could never conquer Scotland, its solution was to coopt the Scottish elite, who reciprocated, culminating in a merger of the two monarchies and then the two states in the seventeenth and eighteenth centuries. The British empire provided Scotland with peace, prosperity, and access to the rest of the world. History and geopolitics do not imply that Scottish independence is impossible, i.e. that union with the rest of Britain is inevitable and permanent. The Anglo-Scots union is only 314 or 418 years old, whereas Scotland existed as a recognizable kingdom for roughly six centuries prior to the joining of the crowns in 1603. It is entirely possible for Scotland to secede and break up the union known as Great Britain. The principle of rule by consent and modern democratic ideology make it difficult for London and Westminster to force Scotland into subjection like in the old days. In particular, American hegemony over Europe since WWII and the rise of the European Union have created a pathway for Scottish independence. England is no longer the indispensable gateway to peace and prosperity. Scotland can exist independently under the EU’s economic umbrella and the American security umbrella.   Europe has always played a major role in Scotland’s political fate and has always held the key to independence. Independence usually failed because European powers failed to devote large and steady resources to supporting Scotland militarily and economically. France was Scotland’s greatest patron and would lend its support for Scottish rebellion. But France also consistently failed Scotland (and Ireland) at critical junctures when independence might have been obtained. This is because France’s interests lay in distracting England rather than adopting Scotland. Chart 5Scottish Energy Production In Decline Today’s unified European continent could be a much greater patron than France ever was alone. The EU could assure Scotland of investment and access to markets even in the face of British resistance. However, the EU is still not politically unified: some members fear separatism in their own borders and therefore tend to oppose Scottish accession. It is possible that the EU could overcome this difficulty but only after a series of major events (on which more below). It took an American empire to clear the way for Irish independence. But Ireland has the moat of the Irish Sea – and the United Kingdom still retained Northern Ireland. Today the United States can be expected to keep its distance from quarrels within the UK or between the UK and EU. However, it does not have an interest in Scottish secession or any other disintegration of the UK, whether from a global security point of view (the West’s conflict with Russia) or even from the point of view of US grand strategy relative to Europe (prevention of a European empire that could challenge the US). An independent Scotland would struggle economically. Its declining base of fossil fuel reserves illustrates the problem of generating sufficient revenue to maintain the Scandinavian-style social welfare state that Scotland’s nationalists imagine (Chart 5). Scottish nationalists are keen to embrace renewable energy – and the Scottish Greens are pro-independence – yet Scotland is not a manufacturing powerhouse that will produce its own solar panels and windmills. In the face of economic difficulties, Scotland would become politically divided like it was for most of its history prior to union with England. England would revert to an obstructive or sabotaging role. It is telling that the Scottish voter turnout in the 2014 independence referendum was very strong – much stronger than in other recent elections and plebiscites, including the Brexit referendum in Scotland (Table 1). The implication is that it is much harder for Scotland to strike out on its own than it appears. Opinion polling cited above suggests that neither Brexit nor the COVID-19 pandemic has moved the needle decisively in the direction of independence. If anything it is the opposite. The Scottish National Party has lost momentum since 2014 and is losing momentum in advance of today’s local election, which has been pitched as the opportunity to make a second go at independence (Chart 6). Table 1Scotland: High Turnout In 2014 Independence Referendum Implies Firm Conclusion To Stay In UK Chart 6Scottish National Party Losing Momentum Just Ahead Of Holyrood Election Bottom Line: History suggests that the geopolitical and macroeconomic barriers to a unified and independent Scottish state are higher and stronger than they may appear at any given time, including the inevitable periods of tensions with England like today. The UK’s Saving Graces A fair question is whether the UK’s decision to leave the EU since 2016 has changed Scotland’s calculus. Brexit may also have affected the international context, reducing the EU’s willingness to intervene on the UK’s behalf and discourage Scottish ambitions. However, a handful of factors supports the continuation of the union despite Scotland’s grievances. The UK proved a boon amid COVID-19: While 62% of Scots voted against Brexit, the COVID-19 pandemic and recession have supplanted Brexit as the nation’s chief cause of concern. The UK and Scotland saw a higher rate of deaths during the biggest waves of the pandemic but now the pandemic is effectively over in the UK and Scotland, in stark contrast with the European Union (Chart 7). The UK has provided a net benefit to Scotland by inventing the vaccine and distributing it effectively (Chart 8). Scottish voters would have been worse off had they left the UK in 2014. Of course, Scottish nationalism is apparent in the fact that voters give the credit to Edinburgh while blaming London over its handling of the pandemic (Chart 9). But the underlying material reality – that being part of the UK provided a net benefit – will discourage independence sentiment. The Scottish Conservative Party and Labour Party are both in favor of sustaining the union and have benefited in opinion polling since the pandemic peaked. Chart 7COVID Deaths Collapse In ##br##United Kingdom Chart 8Scotland Benefited From UK Vaccine And Rollout   Chart 9Scots Praise Edinburgh, Blame London On COVID Handling Brexit is a cautionary economic tale: If Brexit is relevant to Scottish voters, it is not the source of grievance that it could have been. Prime Minister Boris Johnson achieved an exit and trade deal at the end of 2019-20 that largely preserves economic ties with the EU. True, the deal has problems that undermine the UK economy and enhance Scottish grievances. But these also serve as a warning to Scots who would attempt to exit the UK, highlighting the economic pitfalls of raising borders and barriers against one’s chief market. The UK’s trade is far more critical to Scotland’s economy than that of the EU (Chart 10).   Chart 10Major Constraint On Scottish Independence Unlike in the case of the UK and EU, Scotland shares the same currency and central bank with the UK. Scotland’s large banking sector stands to suffer drastically if the Bank of England ceases to be a lender of last resort. This would become a major problem at least until Scotland could be assured of admission into the EU and Euro Area. Otherwise redenomination into a national currency would deal an even greater financial and economic blow. Scots  would face a far more painful economic divorce from the UK than the UK faced with the EU. The UK’s fiscal blowout helped Scotland: Since the bank run at Northern Rock in 2007, the UK and Scotland have suffered a series of crises. This instability should discourage risk appetite today when contrasted with the possibility of stimulus-fueled economic recovery. In particular, the UK government is no longer pursuing fiscal austerity – an economic policy that fanned the flames of Scottish secession back in 2012. Indeed, the UK tops the ranks of global fiscal stimulus, according to the change in government net lending and borrowing as reported by the IMF. The UK’s outlier status ensures that Scotland receives more fiscal support than it otherwise would have (Chart 11). A brief comparison with comparable countries – Ireland, Belgium, France, Norway, Portugal – reinforces the point. Chart 11Scotland Benefited From UK Fiscal Blowout The UK’s aggressive policy of monetary and fiscal reflation is not a coincidence. It stems from the past two decades’ constitutional and political struggles – it is an outgrowth of domestic instability and populism. It includes an industrial policy, a green energy policy, and other rebuilding measures to combat the erosion of the state in the wake of hyper-globalization. Essentially the UK, even under a Tory government, is now about debt monetization and nation-building. While Scotland would have trouble bargaining for its share of EU resources, it benefits from the UK’s shift to government largesse and can use the threat of independence to receive greater funds from the United Kingdom. Geopolitics discourages a fledgling Scottish nation. Scotland hosts naval and air bases of considerable value to the UK, US, and broader NATO alliance. Former US President Trump’s punitive measures against the European allies and open doubts about the US’s commitment to NATO’s collective security illustrated the dangers of western divisions in the face of autocratic regimes like Russia and China. The US and EU are now recommitting to their economic and security bonds under the Biden administration. Scottish independence would undermine this recommitment and as such the small country would pit itself against the US, EU, and NATO. While the US and NATO would ultimately admit Scotland into collective security, for fear of cultivating a neutral Scotland that could eventually be exploited by Russia, they would likely discourage independence ahead of time to prevent a historic division within the UK and NATO. Chart 12No Urgency For A Second Referendum As for the EU, the Spanish government has indicated that it would be willing to make an exception for Scottish independence if it were negotiated amicably with the United Kingdom.2 Such statements are doubtful, however, as any successful secession would lend ideological credibility to Spanish secessionism – not only in Catalonia but also in the Basque country and elsewhere. And Spain is not the only country that harbors deep hesitations over Scottish accession to the European Union. Belgium, Slovakia, and Cyprus could also oppose it. It only takes a single veto to halt the whole accession process. Ultimately the EU could accept Scotland, just as would NATO, to avoid the dangers of having a neutral state in a strategic location. But the point is that Scottish voters cannot be certain. For example, Scotland cannot secure EU accession prior to leaving the UK and yet to leave the UK and fail to achieve EU accession would render it a fledgling. This explains why Scottish voters are not eager to hold a new independence referendum (Chart 12). Bottom Line: The UK offers medical, economic, fiscal, and geopolitical advantages to Scotland that independence would revoke. The context of Great Power struggle with Russia and China means that an independent Scotland would probably ultimately be admitted into NATO and the EU – but Scottish voters cannot be certain, a factor that discourages independence at least in the short and medium run. Scottish Hurdles Table 2 highlights the historic results of Scottish elections according to political party, popular vote share, and share of seats in parliament. Early, tentative signs suggest that the Scottish National Party maxed out in 2011. The party has suffered from a leadership schism, offshoot parties, and a distraction of its key message since 2014. The implication is not only that Scottish independence is on ice for now but also that the tumultuous constitutional disagreements are subsiding and voters want to focus on economic recovery. Table 2Scottish National Party Hit High-Water Mark In 2011? If the Scottish National Party manages to form a majority coalition capable of pushing forward a second referendum, it will face several hurdles. It will need a UK Supreme Court ruling on the legality of a referendum. If a referendum is declared legal (as it very likely will be), Scotland will need to forge an agreement with Prime Minister Boris Johnson to hold a referendum. If a referendum eventually is held and passes, an exit will need to be negotiated. In a post-Brexit world, investors cannot assume that any referendum will fail or that a referendum is a domestic political ploy that the ruling party has no serious intention of following through. Nevertheless it is true that the Scottish National Party could use the threat of a referendum to agree to negotiate a greater devolution of power from Westminster. The party could hold up England’s concessions as a victory while retaining the independence threat as leverage for a later date. Devolution in the past has strengthened the independence cause, as in the creation of the Scottish parliament in 1999. After all, a referendum loss would be devastating for the nationalists, whereas the threat of a referendum could yield victories without depriving the nationalists of their reason for being. It is notable that First Minister Nicola Sturgeon promised not to hold a “wildcat” referendum, in which Scotland holds a referendum regardless of what Westminster or the UK Supreme Court say. The implication is that Scottish nationalism is looking for a stable way to exit. But if stability is the hope then there is dubious support for independence in the first place. A wildcat referendum is theoretically still an option but a formal process with popular support is much more likely to result in a successful referendum than an informal process with dubious popular support. Chart 13Scotland’s Chronic Deficits If Scottish independence succeeded in any wildcat referendum, an extreme controversy would follow as Edinburgh tried to translate this result to the formal political and constitutional sphere. If the referendum were not recognized by the UK then Scotland would be forced to secede unilaterally at greater economic cost. Otherwise a third referendum (second formal referendum) would need to be held to confirm the results. Any third referendum would be irrevocable. As with Brexit, the secessionists would have to carry one or more subsequent elections to execute the political will in the event of secession. The point for investors is that volatility would be prolonged as was the case with Brexit. A major complication in Scottish independence remains the problem of public finances. Scotland’s fiscal standing is weak. Scotland ran a 9.4% of GDP budget deficit prior to COVID-19, excluding transfers from the UK, which compensates for a gap of about 6% of GDP (Chart 13).3 The country maintains generous social spending alongside a low-tax regime. There is no sign of correction as all Scottish parties are proposing more expansive social spending in the parliamentary election. The Scottish National Party is even proposing universal basic income. Scotland’s emergency COVID deficits are larger than the UK’s as well and projections over the coming years suggest that they will stay elevated. Historically economic growth keeps closely in line with the rest of the UK and there is no reason to believe independence would boost growth. The implication is that Scotland would have to curtail spending or raise taxes to come into line with UK-sized deficits, which are not small (Chart 14).4 Of course Scotland would not embrace austerity unless financial market pressure forced it to do so. Chart 14Scottish Deficit Projected Larger Than UK Scotland would become a high-debt economy. Its public debt-to-GDP ratio would be about 97%, on a back-of-the-envelope calculation. Back in 2013 estimates ranged around 80% of GDP.5 The Scottish National Party’s Sustainable Growth Commission projected in 2018 – before the pandemic blew an even wider hole in the budget deficit – that deficits would nearly have to be cut in half (i.e. capped at 5% of GDP and falling) to achieve a 50% debt-to-GDP ratio over 10 years.6 This is not going to happen. Scotland would also have to take on a portion of the UK’s national debt if it were to have an amicable divorce from the UK and retain the pound sterling. But then much of its newfound independence would be compromised from the beginning by legacy debt and monetary policy shackles. Similar restrictions would come with EU and euro membership. Any accession process after the pandemic would require conformity to the EU’s growth and stability pact, which limits deficits and debt. Redenomination into a national currency, as noted, would dilute domestic wealth, zap the financial industry, and self-impose austerity. Bottom Line: Even if the Scottish nationalists manage to put together a pro-independence majority in Edinburgh, they face a complex process in setting up a referendum. Its passage is doubtful based on the current evidence. But obviously in the wake of Brexit investors should not assume that a referendum attempt will fail or that a successful referendum will be thwarted by parliament after a “leave” vote. The timeline for a second referendum is not imminent – and Scottish independence is highly unlikely, albeit possible at some future date given that middle-aged Scots lean in favor of independence.   Investment Takeaways We will conclude with two market takeaways: Chart 15UK Stocks Recovering From Referendum Fever Chart 16Hindsight On How To Play A Constitutional Struggle The UK’s referendum fever has compounded political uncertainty and contributed to negative factors for the UK equity market over the past decade. A segmentation of the FTSE 100 according to country shows that Scottish-based companies’ share prices rolled over in the aftermath of the 2014 referendum, while the non-Scottish segment performed better (Chart 15). The implication is not that the referendum caused stocks to fall but that the 2014 independence push was the result of national exuberance supercharged by high commodity prices. Enthusiasm for independence has been flat since that time. What is clear is that financial markets look even less favorably upon Scottish equities than other British equities – another sign of the economic problems that will ultimately discourage Scottish voters from going it alone. In advance of the Scottish election, we went tactically long the Swiss franc relative to the British pound to capitalize on jitters that we expected to hit the currency. This trade was in keeping with the long fall of GBP-CHF over the past decade (Chart 16). But the stronger forces of global stimulus, vaccination, economic normalization, and recovery will soon provide a tailwind for sterling yet again. Therefore we are booking 1% gains and shifting to a more optimistic outlook on the pound. With the Brexit saga and the COVID crisis in the rear view mirror, and the tail risk of Scottish independence unlikely, the pound can resume its upward trajectory – at least relative to the Swiss franc. International equities and cyclicals are also poised to continue rising as the world recovers. We recommend investors go long the FTSE 100 relative to developed markets excluding the United States. Matt Gertken Vice President Geopolitical Strategy mattg@bcaresearch.com Footnotes 1 Jeremy Black, “The Legacy of the Scottish Referendum,” Foreign Policy Research Institute E-Notes, September 22, 2014, fpri.org. 2 See Akash Paun et al, "Scottish Independence: EU Membership And The Anglo-Scottish Border," Institute For Government, March 2021, instituteforgovernment.org.uk. 3 See Eve Hepburn, Michael Keating, and Nicola McEwen, "Scotland’s New Choice: Independence After Brexit," Centre on Constitutional Change, 2021, centreonconstitutionalchange.ac.uk. 4 See David Phillips, "Updated projections of Scotland’s fiscal position – and their implications," Institute for Fiscal Studies, April 29, 2021, ifs.org.uk. 5 Granting that the UK’s general government gross debt stood at GBP 1.88 trillion at the end of 2020, and assuming that Scotland takes on a share of this debt equivalent to Scotland’s share of the UK’s total population and output (roughly 8%), the Scottish debt would stand at GBP 150 billion out of a Scottish GDP at current market prices of GBP 156 billion, or 97% of GDP. For the 2013 estimate of at least 80% of GDP, see David Bell, "Scottish Independence: Debt And Assets," Centre on Constitutional Change, December 3, 2013, centreonconstitutionalchange.ac.uk.  6 Scottish National Party, "Part B: The Framework & Strategy for the Sustainable Public Finances of an Independent Scotland," Sustainable Growth Commission, May 2018, sustainablegrowthcommission.scot. The commission’s debt curbs will have to be revised in the wake of COVID-19. For discussion see Chris Giles and Murie Dickie, "Independent Scotland would face a large hole in its public finances," Financial Times, April 2, 2021, ft.com.  

Highlights Biden’s first 100 days are characterized by a liberal spend-and-tax agenda unseen since the 1960s. It is not a “bait and switch,” however. Voters do not care about deficits and debt. At least not for now. The apparent outcome of the populist surge in the US and UK in 2016 is blowout fiscal spending. Yet the US and UK also invented and distributed vaccines faster than others. US growth and equities have outperformed while the US dollar experienced a countertrend bounce. While growth will rotate to other regions, China’s stimulus is on the wane. Of Biden’s three initial geopolitical risks, two are showing signs of subsiding: Russia and Iran. US-China tensions persist, however, and Biden has been hawkish so far. Our new Australia Geopolitical Risk Indicator confirms our other indicators in signaling that China risk, writ large, remains elevated. Cyclically we are optimistic about the Aussie and Australian stocks. Mexico’s midterm elections are likely to curb the ruling party’s majority but only marginally. The macro and geopolitical backdrop is favorable for Mexico. Feature US President Joe Biden gave his first address to the US Congress on April 28. Biden’s first hundred days are significant for his extravagant spending proposals, which will rank alongside those of Lyndon B. Johnson’s Great Society, if not Franklin Delano Roosevelt’s New Deal, in their impact on US history, for better and worse. Chart 1Biden's First 100 Days - The Market's Appraisal The global financial market appraisal is that Biden’s proposals will turn out for the better. The market has responded to the US’s stimulus overshoot, successful vaccine rollout, and growth outperformance – notably in the pandemic-struck service sector – by bidding up US equities and the dollar (Chart 1). From a macro perspective we share the BCA House View in leaning against both of these trends, preferring international equities and commodity currencies. However, our geopolitical method has made it difficult for us to bet directly against the dollar and US equities. Geopolitics is about not only wars and trade but also the interaction of different countries’ domestic politics. America’s populist spending blowout is occurring alongside a sharp drop in China’s combined credit-and-fiscal impulse, which will eventually weigh on the global economy. This is true even though the rest of the world is beginning to catch up in vaccinations and economic normalization. As for traditional geopolitical risk – wars and alliances – Biden has not yet leaped over the three initial foreign policy hurdles that we have highlighted: China, Russia, and Iran. In this report we will update the view on all three, as there is tentative improvement on the Russian and Iranian fronts. In addition, we will introduce our newest geopolitical risk indicator – for Australia – and update our view on Mexico ahead of its June 6 midterm elections. Biden’s Fiscal Blowout From a macro point of view, Biden’s $1.9 trillion American Rescue Plan Act (ARPA) was much larger than what Republicans would have passed if President Trump had won a second term. His proposed $2.3 trillion American Jobs Plan (AJP) is also larger, though both candidates were likely to pass an infrastructure package. The difference lies in the parts of these packages that relate to social spending and other programs, beyond COVID relief and roads and bridges. The Republican proposal for COVID relief was $618 billion while the Republicans’ current proposal on infrastructure is $568 billion – marking a $3 trillion difference from Biden. In reality Republicans would have proposed larger spending if Trump had remained president – but not enough to close this gap. And Biden is also proposing a $1.8 trillion American Families Plan (AFP). Biden’s praise for handling the vaccinations must be qualified by the Trump administration’s successful preparations, which have been unfairly denigrated. Similarly, Biden’s blame for the migrant surge at the southern border must be qualified by the fact that the surge began last year.1 A comparison with the UK will put Biden’s administration into perspective. The only country comparable to the US in terms of the size of fiscal stimulus over 2019-21 so far – excluding Biden’s AJP and AFP, which are not yet law – is the United Kingdom. Thus the consequence of the flare-up of populism in the Anglo-Saxon world since 2016 is a budget deficit blowout as these countries strive to suppress domestic socio-political conflict by means of government largesse, particularly in industrial and social programs. However, populist dysfunction was also overrated. Both the US and UK retain their advantages in terms of innovation and dynamism, as revealed by the vaccine and its rollout (Chart 2). Chart 2Dysfunctional Anglo-Saxon Populism? No sharp leftward turn occurred in the UK, where Prime Minister Boris Johnson and his Conservatives had the benefit of a pre-COVID election in December 2019, which they won. By contrast, in the US, President Trump and the Republicans contended an election after the pandemic and recession had virtually doomed them to failure. There a sharp leftward turn is taking place. Going forward the US will reclaim the top rank in terms of fiscal stimulus, as Biden is likely to get his infrastructure plan (AJP) passed. Our updated US budget deficit projections appear in Chart 3. Our sister US Political Strategy gives the AJP an 80% chance of passing in some form and the AFP only a 50% chance of passing, depending on how quickly the AJP is passed. This means the blue dashed line is more likely to occur than the red dashed line. The difference is slight despite the mind-boggling headline numbers of the plans because the spending is spread out over eight-to-ten years and tax hikes over 15 years will partially offset the expenditures. Much will depend on whether Congress is willing to pay for the new spending. In Chart 3 we assume that Biden will get half of the proposed corporate tax hikes in the AJP scenario (and half of the individual tax hikes in the AFP scenario). If spending is watered down, and/or tax hikes surprise to the upside, both of which are possible, then the deficit scenarios will obviously tighten, assuming the economic recovery continues robustly as expected. But in the current political environment it is safest to plan for the most expansive budget deficit scenarios, as populism is the overriding force. Chart 3Biden’s Blowout Spending Biden’s campaign plan was even more visionary, so it is not true that Biden pulled a “bait and switch” on voters. Rather, the median voter is comfortable with greater deficits and a larger government role in American life. Bottom Line: The implication of Biden’s spending blowout is reflationary for the global economy, cyclically negative for the US dollar, and positive for global equities. But on a tactical time frame the rotation to other equities and currencies will also depend on China’s fiscal-and-credit deceleration and whether geopolitical risk continues to fall. Russia: Some Improvement But Coast Not Yet Clear US-Russia tensions appeared to fizzle over the past week but the coast is not yet clear. We remain short Russian currency and risk assets as well as European emerging market equities. Tensions fell after President Putin’s State of the Nation address on April 21 in which he warned the West against crossing Russia’s “red lines.” Biden’s sanctions on Russia were underwhelming – he did not insist on halting the final stages of the Nord Stream II pipeline to Germany. Russia declared it would withdraw its roughly 100,000 troops from the Ukrainian border by May 1. Russian dissident Alexei Navalny ended his hunger strike. Putin attended Biden’s Earth Day summit and the two are working on a bilateral summit in June. Chart 4Russia's Domestic Instability Will Continue De-escalation is not certain, however. First, some US officials have cast doubt on Russia’s withdrawal of troops and it is known that arms and equipment were left in place for a rapid mobilization and re-escalation if necessary. Second, Russian-backed Ukrainian separatists will be emboldened, which could increase fighting in Ukraine that could eventually provoke Russian intervention. Third, the US has until August or September to prevent Nord Stream from completion. Diplomacy between Russia and the US (and Russia and several eastern European states) has hit a low point on the withdrawal of ambassadors. Fourth, Russian domestic politics was always the chief reason to prepare for a worse geopolitical confrontation and it remains unsettled. Putin’s approval rating still lingers in the relatively low range of 65% and government approval at 49%. The economic recovery is weak and facing an increasingly negative fiscal thrust, along with Europe and China, Russia’s single-largest export destination (Chart 4). Putin’s handouts to households, in anticipation of the September Duma election, only amount to 0.2% of GDP. More measures will probably be announced but the lead-up to the election could still see an international adventure designed to distract the public from its socioeconomic woes. Russia’s geopolitical risk indicators ticked up as anticipated (Chart 5). They may subside if the military drawdown is confirmed and Biden and Putin lower the temperature. But we would not bet on it. Chart 5Russian Geopolitical Risk: Wait For 'All Clear' Signal Bottom Line: It is possible that Biden has passed his first foreign policy test with Russia but it is too soon to sound the “all clear.” We remain short Russian ruble and short EM Europe until de-escalation is confirmed. The Russian (and German) elections in September will mark a time for reassessing this view. Iran: Diplomacy On Track (Hence Jitters Will Rise) While Russia may or may not truly de-escalate tensions in Ukraine, the spring and summer are sure to see an increase in focus on US-Iran nuclear negotiations. Geopolitical risks will remain high prior to the conclusion of a deal and will materialize in kinetic attacks of various kinds. This thesis is confirmed by the alleged Israeli sabotage of Iran’s Natanz nuclear facility this month. The US Navy also fired warning shots at Iranian vessels staging provocations. Sporadic attacks in other parts of the region also continue to flare, most recently with an Iranian tanker getting hit by a drone at a Syrian oil terminal.2 The US and Iran are making progress in the Vienna talks toward rejoining the 2015 nuclear deal from which the US withdrew in 2018. Iran pledged to enrich uranium up to 60% but also said this move was reversible – like all its tentative violations of the Joint Comprehensive Plan of Action (JCPA) so far (Table 1). Iran also offered a prisoner swap with the US. Saudi Arabia appears resigned to a resumption of the JCPA that it cannot prevent, with crown prince Mohammed bin Salman offering diplomatic overtures to both the US and Iran. Table 1Iran’s Nuclear Program And Compliance With JCPA 2015 Still, the closer the US and Iran get to a deal the more its opponents will need to either take action or make preparations for the aftermath. The allegation that former US Secretary of State John Kerry’s shared Israeli military plans with Iranian Foreign Minister Javad Zarif is an example of the kind of political brouhaha that will occur as different elements try to support and oppose the normalization of US-Iran ties. More importantly Israel will underscore its red line against nuclear weaponization. Previously Iran was set to reach “breakout” capability of uranium enrichment – a point at which it has enough fissile material to produce a nuclear device – as early as May. Due to sabotage at the Natanz facility the breakout period may have been pushed back to July.3 This compounds the significance of this summer as a deadline for negotiating a reduction in tensions. While the US may be prepared to fudge on Iran’s breakout capabilities, Israel will not, which means a market-relevant showdown should occur this summer before Israel backs down for fear of alienating the United States. Tit-for-tat attacks in May and June could cause negative surprises for oil supply. Then there will be a mad dash by the negotiators to agree to deal before the de facto August deadline, when Iran inaugurates a new president and it becomes much harder to resolve outstanding issues. Chart 6Iran Deal Priced Into Oil Markets? Hence our argument that geopolitics adds upside risk to oil prices in the first half of the year but downside risk in the second half. The market’s expectations seem already to account for this, based on the forward curve for Brent crude oil. The marginal impact of a reconstituted Iran nuclear deal on oil prices is slightly negative over the long run since a deal is more likely to be concluded than not and will open up Iran’s economy and oil exports to the world. However, our Commodity & Energy Strategy expects the Brent price to exceed expectations in the coming years, judging by supply and demand balances and global macro fundamentals (Chart 6). If an Iran deal becomes a fait accompli in July and August the Saudis could abandon their commitment to OPEC 2.0’s production discipline. The Russians and Saudis are not eager to return to a market share war after what happened in March 2020 but we cannot rule it out in the face of Iranian production. Thus we expect oil to be volatile. Oil producers also face the threat of green energy and US shale production which gives them more than one reason to keep up production and prevent prices from getting too lofty. Throughout the post-2015 geopolitical saga between the US and Iran, major incidents have caused an increase in the oil-to-gold ratio. The risk of oil supply disruption affected the price more than the flight to gold due to geopolitical or war risk. The trend generally corresponds with that of the copper-to-gold ratio, though copper-to-gold rose higher when growth boomed and oil outperformed when US-Iran tensions spiked in 2019. Today the copper-to-gold ratio is vastly outperforming the oil-to-gold on the back of the global recovery (Chart 7). This makes sense from the point of view of the likelihood of a US-Iran deal this year. But tensions prior to a deal will push up oil-to-gold in the near term. Chart 7Biden Passes Iran Test? Likely But Not A Done Deal Bottom Line: The US-Iran diplomacy is on track. This means geopolitical risk will escalate in May and June before a short-term or interim deal is agreed in July or August. Geopolitical risk stemming from US-Iran relations will subside thereafter, unless the deadline is missed. The forward curve has largely priced in the oil price downside except for the risk that OPEC 2.0 becomes dysfunctional again. We expect upside price surprises in the near term. Biden, China, And Our Australia GeoRisk Indicator Ostensibly the US and Russia are avoiding a war over Ukraine and the US and Iran are negotiating a return to the 2015 nuclear deal. Only US-China relations utterly lack clarity, with military maneuvering in the Taiwan Strait and South China Sea and tensions simmering over the gamut of other disputes. Chart 8Biden Still Faces China Test The latest data on global military spending show not only that the US and China continue to build up their militaries but also that all of the regional allies – including Japan! – are bulking up defense spending (Chart 8). This is a substantial confirmation of the secular growth of geopolitical risk, specifically in reaction to China’s rise and US-China competition. The first round of US-China talks under Biden went awry but since then a basis has been laid for cooperation on climate change, with President Xi Jinping attending Biden’s virtual climate change summit (albeit with no bilateral summit between the two). If John Kerry is removed as climate czar over his Iranian controversy it will not have an impact other than to undermine American negotiators’ reliability. The deeper point is that climate is a narrow basis for US-China cooperation and it cannot remotely salvage the relationship if a broader strategic de-escalation is not agreed. Carbon emissions are more likely to become a cudgel with which the US and West pressure China to reform its economy faster. The Department of Defense is not slated to finish its comprehensive review of China policy until June but most US government departments are undertaking their own reviews and some of the conclusions will trickle out in May, whether through Washington’s actions or leaks to the press. Beijing could also take actions that upend the Biden administration’s assessment, such as with the Microsoft hack exposed earlier this year. The Biden administration will soon reveal more about how it intends to handle export controls and sanctions on China. For example, by May 19 the administration is slated to release a licensing process for companies concerned about US export controls on tech trade with China due to the Commerce Department’s interim rule on info tech supply chains. The Biden administration looks to be generally hawkish on China, a view that is now consensus. Any loosening of punitive measures would be a positive surprise for Chinese stocks and financial markets in general. There are other indications that China’s relationship with the West is not about to improve substantially – namely Australia. Australia has become a bellwether of China’s relations with the world. While the US’s defense commitments might be questionable with regard to some of China’s neighbors – namely Taiwan (Province of China) but also possibly South Korea and the Philippines – there can be little doubt that Australia, like Japan, is the US’s red line in the Pacific. Australian politics have been roiled over the past several years by the revelation of Chinese influence operations, state- or military-linked investments in Australia, and propaganda campaigns. A trade war erupted last year when Australia called for an investigation into the origins of COVID-19 and China’s handling of it. Most recently, Victoria state severed ties with China’s Belt and Road Initiative. Despite the rise in Sino-Australian tensions, the economic relationship remains intact. China’s stimulus overweighed the impact of its punitive trade measures against Australia, both by bidding up commodity prices and keeping the bulk of Australia’s exports flowing (Chart 9). As much as China might wish to decouple from Australia, it cannot do so as long as it needs to maintain minimum growth rates for the sake of social stability and these growth rates require resources that Australia provides. For example, global iron ore production excluding Australia only makes up 80% of China’s total iron ore imports, which necessitates an ongoing dependency here (Chart 10). Brazil cannot make up the difference. Chart 9China-Australia Trade Amid Tensions Chart 10China Cannot Replace Australia This resource dependency does not necessarily reduce geopolitical tension, however, because it increases China’s supply insecurity and vulnerability to the US alliance. The US under Biden explicitly aims to restore its alliances and confront autocratic regimes. This puts Australia at the front lines of an open-ended global conflict. Chart 11Introducing: Australia GeoRisk Indicator (Smoothed) Our newly devised Australia GeoRisk Indicator illustrates the point well, as it has continued surging since the trade war with China first broke out last year (Chart 11). This indicator is based on the Australian dollar and its deviation from underlying macro variables that should determine its course. These variables are described in Appendix 1. If the Aussie weakens relative to these variables, then an Australian-specific risk premium is apparent. We ascribe that premium to politics and geopolitics writ large. A close examination of the risk indicator’s performance shows that it tracks well with Australia’s recent political history (Chart 12). Previous peaks in risk occurred when President Trump rose to power and Australia, like Canada, found itself beset by negative pressures from both the US and China. In particular, Trump threatened tariffs and the Australian government banned China’s Huawei from its 5G network. Today the rise in geopolitical risk stems almost exclusively from China. There is potential for it to roll over if Biden negotiates a reduction in tensions but that is a risk to our view (an upside risk for Australian and global equities). Chart 12Australian GeoRisk Indicator (Unsmoothed) What does this indicator portend for tradable Australian assets? As one would expect, Australian geopolitical risk moves inversely to the country’s equities, currency, and relative equity performance (Chart 13). Australian equities have risen on the back of global growth and the commodity boom despite the rise in geopolitical risk. But any further spike in risk could jeopardize this uptrend. Chart 13Australia Geopolitical Risk And Tradable Assets An even clearer inverse relationship emerges with the AUD-JPY exchange rate, a standard measure of risk-on / risk-off sentiment in itself. If geopolitical risk rises any further it should cause a reversal in the currency pair. Finally, Australian equities have not outperformed other developed markets excluding the US, which may be due to this elevated risk premium. Bottom Line: China is the most important of Biden’s foreign policy hurdles and unlike Russia and Iran there is no sign of a reduction in tension yet. Our Australian GeoRisk Indicator supports the point that risk remains very elevated in the near term. Moreover China’s credit deceleration is also negative for Australia. Cyclically, however, assuming that China does not overtighten policy, we take a constructive view on the Aussie and Australian equities. Biden’s Border Troubles Distract From Bullish Mexico Story The biggest criticism of Biden’s first 100 days has been his reduction in a range of enforcement measures on the southern border which has encouraged an overflow of immigrants. Customs and Border Patrol have seen a spike in “encounters” from a low point of around 17,000 in 2020 to about 170,000 today. The trend started last year but accelerated sharply after the election and had surpassed the 2019 peak of 144,000. Vice President Kamala Harris has been put in charge of managing the border crisis, both with Mexico and Central American states. She does not have much experience with foreign policy so this is her opportunity to learn on the job. She will not be able to accomplish much given that the Biden administration is unwilling to use punitive measures or deterrence and will not have large fiscal resources available for subsidizing the nations to the south. With the US economy hyper-charged, especially relative to its southern neighbors, the pace of immigration is unlikely to slacken. From a macro point of view the relevance is that the US is not substantially curtailing immigration – quite the opposite – which means that labor force growth will not deviate from its trend. What about Mexico itself? It is not likely that Harris will be able to engage on a broader range of issues with Mexico beyond immigration. As usual Mexico is beset with corruption, lawlessness, and instability. To these can be added the difficulties of the pandemic and vaccine rollout. Tourism and remittances are yet to recover. Cooperation with US federal agents against the drug cartels is deteriorating. Cartels control an estimated 40% of Mexican territory.4 Nevertheless, despite Mexico’s perennial problems, we hold a positive view on Mexican currency and risk assets. The argument rests on five points: Strong macro fundamentals: With China’s fiscal-and-credit impulse slowing sharply, and US stimulus accelerating, Mexico stands to benefit. Mexico has also run orthodox monetary and fiscal policies. It has a demographic tailwind, low wages, and low public debt. The stars are beginning to align for the country’s economy, according to our Emerging Markets Strategy. US and Canadian stimulus: The US and Canada have the second- and third-largest fiscal stimulus of all the major countries over the 2019-21 period, at 9% and 8% of GDP respectively. Mexico, with the new USMCA free trade deal in hand, will benefit. US protectionism fizzled: Even Republican senators blocked President Trump’s attempted tariffs on Mexico. Trump’s aggression resulted in the USMCA, a revised NAFTA, which both US political parties endorsed. Mexico is inured to US protectionism, at least for the short and medium term. Diversification from China: Mexico suffered the greatest opportunity cost from China’s rise as an offshore manufacturer and entrance to the World Trade Organization. Now that the US and other western countries are diversifying away from China, amid geopolitical tensions, Mexico stands to benefit. The US cannot eliminate its trade deficit due to its internal savings/investment imbalance but it can redistribute that trade deficit to countries that cannot compete with it for global hegemony. AMLO faces constraints: A risk factor stemmed from politics where a sweeping left-wing victory in 2018 threatened to introduce anti-market policies. President Andrés Manuel López Obrador (known as AMLO) and his MORENA party gained a majority in both houses of the legislature. Their coalition has a two-thirds majority in the lower house (Chart 14). However, we pointed out that AMLO’s policies have not been radical and, more importantly, that the midterm election would likely constrain his power. Chart 14Mexico’s Midterm Election Looms These are all solid points but the last item faces a test in the upcoming midterm election. AMLO’s approval rating is strong, at 63%, putting him above all of his predecessors except one (Chart 15). AMLO’s approval has if anything benefited from the COVID-19 crisis despite Mexico’s inability to handle the medical challenge. He has promised to hold a referendum on his leadership in early 2022, more than halfway through his six-year term, and he is currently in good shape for that referendum. For now his popularity is helpful for his party, although he is not on the ballot in 2021 and MORENA’s support is well beneath his own. Chart 15AMLO’s Approval Fairly Strong MORENA’s support is holding at a 44% rate of popular support and its momentum has slightly improved since the pandemic began. However, MORENA’s lead over other parties is not nearly as strong as it was back in 2018 (Chart 16, top panel). The combined support of the two dominant center-right parties, the Institutional Revolutionary Party and the National Action Party, is almost equal to that of MORENA. And the two center-left parties, the Democratic Revolution Party and Citizen’s Movement, are part of the opposition coalition (Chart 16, bottom panel). The pandemic and economic crisis will motivate the opposition. Chart 16MORENA’s Support Holding Up Despite COVID Traditionally the president’s party loses seats in the midterm election (Table 2). Circumstances are different from the US, which also exhibits this trend, because Mexico has more political parties. A loss of seats from MORENA does not necessarily favor the establishment parties. Nevertheless opinion polling shows that about 45% of voters say they would rather see MORENA’s power “checked” compared to 41% who wish to see the party go on unopposed.5 Table 2Mexican President’s Party Tends To Lose Seats In Midterm Election While the ruling coalition may lose its super-majority, it is not a foregone conclusion that MORENA will lose its majority. Voters have decades of experience of the two dominant parties, both were discredited prior to 2018, and neither has recovered its reputation so quickly. The polling does not suggest that voters regret their decision to give the left wing a try. If anything recent polls slightly push against this idea. If MORENA surprises to the upside then AMLO’s capabilities would increase substantially in the second half of his term – he would have political capital and an improving economy. While the senate is not up for grabs in the midterm, MORENA has a narrow majority and controls a substantial 60% of seats when its allies are taken into account. In this scenario AMLO could pursue his attempts to increase the state’s role in key industries, like energy and power generation, at the expense of private investors. Even then the Supreme Court would continue to act as a check on the government. The 11-seat court is currently made up of five conservatives, two independents, and three liberal or left-leaning judges. A new member, Margarita Ríos Farjat, is close to the government, leaving the conservatives with a one-seat edge over the liberals and putting the two independents in the position of swing voters. Even if AMLO maintains control of the lower house, he will not be able to override the constitutional court, as he has threatened on occasion to do, without a super-majority in the senate. Bottom Line: AMLO will likely lose some ground in the lower house and thus suffer a check on his power. This will only confirm that Mexican political risk is not likely to derail positive underlying macro fundamentals. Continue to overweight Mexican equities relative to Brazilian.   Matt Gertken Vice President Geopolitical Strategy mattg@bcaresearch.com   Appendix 1 The market is the greatest machine ever created for gauging the wisdom of the crowd and as such our Geopolitical Risk Indicators were not designed to predict political risk but to answer the question of whether and to what extent markets have priced that risk. Our Australian GeoRisk Indicator (see Chart 11-12 above) uses the same simple methodology used in our other indicators, which avoid the pitfall of regression-based models. We begin with a financial asset that has a daily frequency in price, in this case the AUD, and compare its movement against several fundamental factors – in this case global energy and base metal prices, global metals and mining stock prices, and the Chilean peso. Australia is a commodity-exporting country. It is the largest producer of iron ore and is among the largest producers of coal and natural gas. It is also a major trading partner for China. Due to the nature of its economy the Australian dollar moves with global metal and energy prices and the global metals and mining equity prices. Chile, another major commodity producer also moves with global metal prices, hence our inclusion of the peso in this indicator. The AUD has a high correlation with all of these assets, and if the changes in the value of the AUD lag or lead the changes in the value of these assets, the implication is that geopolitical risk unique to Australia is not priced by the market. We included the peso as Chile is not as affected as Australia by any conflict in the South China Sea or Northeast Asia, which means that a deviation of the AUD from CLP represents a unique East Asia Pacific risk. Our indicator captures the involvement of Australia in a few regional and international conflicts. The indicator climbed as Australia got involved in the East Timor emergency and declined as it exited. It continued declining even as Australia joined the US in the Afghanistan and Iraq wars, which showed that investors were unperturbed by faraway wars, while showing measurable concern in the smaller but closer Timorese conflict. Risks went up again as the nation erupted in labor protests as the Howard government made changes to the labor code. We see the market pricing higher risk again during the 2008 financial crisis, although it was modest and Australia escaped the crisis unscathed due to massive Chinese stimulus. Since then, investors have been climbing a wall of worry as they priced in Northeast Asia-related geopolitical risks. These started with the South Korean Cheonan sinking and continued with the Sino-Japanese clash over the Senkaku islands. They culminated with the Chinese ADIZ declaration in late 2013. In 2016, Australia was shocked again when Donald Trump was elected, and investor fears were evident when the details of Trump-Turnbull spat were made public. The risk indicator reached another peak during the trade wars between the US and the rest of the world. Investors were not worried about COVID-19 as Australia largely contained the pandemic, but the recent Australian-Chinese trade war pushed the risk indicator up, giving investors another wall of worry. If the Biden administration forces Australia into a democratic alliance in confrontation with autocratic China then this risk will persist for some time.   Jesse Anak Kuri Associate Editor Jesse.Kuri@bcaresearch.com We Read (And Liked) ... The Narrow Corridor: States, Societies, And The Fate Of Liberty This book is a sweeping review of the conditions of liberty essential to steering the world away from the Hobbesian war of all against all. In this unofficial sequel to the 2012 hit, Why Nations Fail: The Origins Of Power, Prosperity, And Poverty, Daron Acemoglu (Professor of Economics at the Massachusetts Institute of Technology) and James A. Robinson (Professor of Global Conflict Studies at the University of Chicago) further explore their thesis that the existence and effectiveness of democratic institutions account for a nation’s general success or failure. The Narrow Corridor6 examines how liberty works. It is not “natural,” not widespread, “is rare in history and is rare today.” Only in peculiar circumstances have states managed to produce free societies. States have to walk a thin line to achieve liberty, passing through what the authors describe as a “narrow corridor.” To encourage freedom, states must be strong enough to enforce laws and provide public services yet also restrained in their actions and checked by a well-organized civil society. For example, from classical history, the Athenian constitutional reforms of Cleisthenes “were helpful for strengthening the political power of Athenian citizens while also battling the cage of norms.” That cage of norms is the informal body of customs replaced by state institutions. Those norms in turn “constrained what the state could do and how far state building could go,” providing a set of checks. Though somewhat fluid in its definition, liberty, as Acemoglu and Robinson show, is expressed differently under various “leviathans,” or states. For starters, the “Shackled Leviathan” is a government dedicated to upholding the rule of law, protecting the weak against the strong, and creating the conditions for broad-based economic opportunity. Meanwhile, the “Paper Leviathan” is a bureaucratic machine favoring the privileged class, serving as both a political and economic brake on development and yielding “fear, violence, and dominance for most of its citizens.” Other examples include: The “American Leviathan” which fails to deal properly with inequality and racial oppression, two enemies of liberty; and a “Despotic Leviathan,” which commands the economy and coerces political conformity – an example from modern China. Although the book indulges in too much jargon, it is provocative and its argument is convincing. The authors say that in most places and at most times, the strong have dominated the weak and human freedom has been quashed by force or by customs and norms. Either states have been too weak to protect individuals from these threats or states have been too strong for people to protect themselves from despotism. Importantly, many states believe that once liberty is achieved, it will remain the status quo. But the authors argue that to uphold liberty, state institutions have to evolve continuously as the nature of conflicts and needs of society change. Thus society's ability to keep state and rulers accountable must intensify in tandem with the capabilities of the state. This struggle between state and society becomes self-reinforcing, inducing both to develop a richer array of capacities just to keep moving forward along the corridor. Yet this struggle also underscores the fragile nature of liberty. It is built on a precarious balance between state and society; between economic, political, and social elites and common citizens; between institutions and norms. If one side of the balance gets too strong, as has often happened in history, liberty begins to wane. The authors central thesis is that the long-run success of states depends on the balance of power between state and society. If states are too strong, you end up with a “Despotic Leviathan” that is good for short-term economic growth but brittle and unstable over the long term. If society is too strong, the “Leviathan” is absent, and societies suffer under a pre-modern war of all against all. The ideal place to be is in the narrow corridor, under a shackled Leviathan that will grow state capacity and individual liberty simultaneously, thus leading to long-term economic growth. In the asset allocation process, investors should always consider the liberty of a state and its people, if a state’s institutions grossly favor the elite or the outright population, whether these institutions are weak or overbearing on society, and whether they signify a balance between interests across the population. Whether you are investing over a short or long horizon, returns can be significantly impacted in the absence of liberty or the excesses of liberty. There should be a preference among investors toward countries that exhibit a balance of power between state and society, setting up a better long-term investment environment, than if a balance of power did not exist.   Guy Russell Research Analyst GuyR@bcaresearch.com GeoRisk Indicator China Russia UK Germany France Italy Canada Spain Taiwan – Province Of China Korea Turkey Brazil Australia Footnotes 1 "President Biden’s first 100 days as president fact-checked," BBC News, April 29, 2021, bbc.com. 2 "Oil tanker off Syrian coast hit in suspected drone attack," Al Jazeera, April 24, 2021, Aljazeera.com. 3 See Yaakov Lappin, "Natanz blast ‘likely took 5,000 centrifuges offline," Jewish News Syndicate, jns.org. 4 John Daniel Davidson, "Former US Ambassador To Mexico: Cartels Control Up To 40 Percent Of Mexican Territory," The Federalist, April 28, 2021, thefederalist.com. 5 See Alejandro Moreno, "Aprobación de AMLO se encuentra en 61% previo a campañas electorales," El Financiero, April 5, 2021, elfinanciero.com. 6 Penguin Press, New York, NY, 2019, 558 pages. Section III: Geopolitical Calendar

特別レポート

Highlights The US fiscal outlook has deteriorated substantially over the past two decades, as a consequence of the fiscal response to both the global financial crisis and the COVID-19 pandemic. US government debt-to-GDP is now nearly as high as it was at the end of the Second World War, and is projected by the US Congressional Budget Office (CBO) to explode higher over the coming 30 years. Some investors argue that extreme levels of government debt now virtually guarantee that interest rates will remain structurally low, and we test this claim alongside a scenario that limits the projected rise in the primary deficit. We find that US fiscal reform, when it eventually occurs, will likely be negative for health care stocks. We also note that even in a scenario where the US limits the size of its future primary budget deficit, net interest outlays will likely rise to elevated levels compared to history. A comparison with the Canadian experience in the 1990s suggests a structurally negative outlook for the US dollar, from an overvalued starting point. Finally, we note that the US fiscal outlook does not necessarily prevent an increase in interest rates over the coming few years in a scenario where investors raise their expectations for the neutral rate of interest, a possibility that we discussed in last month’s report. This scenario is not our base case view, but it is plausible and should actively be monitored by investors over the coming one to two years. For now, we do not expect that rising interest rates pose a risk to stocks over the coming 6-12 months. Investors should remain cyclically overweight equities within a multi-asset portfolio, and should maintain a below-benchmark level of duration on a risk-adjusted basis. In 2001, US government debt held by the public as a share of GDP stood at 31.5%, after having fallen roughly 16 percentage points from early 1993 levels. Today, as a result of both the global financial crisis and the COVID-19 pandemic, the debt to GDP ratio has risen to a whopping 100%, and is projected to rise meaningfully higher over the coming decades. Feature In this report we review the long-term US fiscal outlook in the wake of the pandemic, with a focus on the implications for interest rates. Some investors argue that extreme levels of government debt now virtually guarantee that interest rates will remain structurally low, and we test this claim alongside a scenario that limits the projected rise in the primary deficit. We find that US fiscal reform, when it eventually occurs, will likely be negative for health care stocks, whose fundamental performance has outstripped that of the broad equity market since the mid-1990s (reflecting pricing power that stands to be curtailed through regulation). We also note that even in a scenario where the US limits the size of its future primary budget deficit, net interest outlays will likely rise to elevated levels compared to history. A comparison with the Canadian experience in the 1990s suggests a structurally negative outlook for the US dollar, from an overvalued starting point. Finally, we note that the US fiscal outlook does not necessarily prevent an increase in interest rates over the coming few years in the hypothetical scenario that we described in last month’s report,1 i.e., an environment where the narrative of secular stagnation is challenged and investor expectations for the neutral rate rise closer to trend rates of economic growth. This scenario is not our base case view, but it is plausible and should actively be monitored by investors over the coming one to two years. For now, investors should remain cyclically overweight equities within a multi-asset portfolio, and should maintain a below-benchmark level of duration on a risk-adjusted basis. Debt Sustainability, And The CBO’s Baseline Projection When analyzing the US fiscal outlook, the Congressional Budget Office’s Long-Term Budget Outlook report is typically the reference point for investors. The report provides annual projections for the budget deficit and the debt-to-GDP ratio for the next three decades, as well as a breakdown of the projected deficit into its primary (i.e., non-interest) and net interest components. Charts II-1 and II-2 present the most recent baseline projections from the CBO, which clearly present a dire long-term outlook. The deficit and debt-to-GDP ratio are projected to be relatively stable over the next decade, but explode higher over the subsequent 20 years. In 2051, the CBO’s baseline projects that the budget deficit will be roughly 13% of GDP, with net interest costs accounting for approximately two-thirds of the deficit. Chart II-1The CBO’s Fiscal Outlook Is Extremely Negative Chart II-2In 2051, The CBO Projects A 13% Annual Budget Deficit In order to understand what is driving the CBO’s dire long-term budget and debt forecast, it is important to review the government debt sustainability equation shown below. The equation highlights that the change in a government’s debt-to-GDP ratio is approximately equal to 1) the primary deficit plus 2) net interest costs as a share of GDP, the latter being defined as the product of last year’s debt-to-GDP ratio and the difference between the average interest rate on the debt and the rate of GDP growth. Δ Debt-To-GDP Ratio ≈ Primary Deficit As A % Of GDP2 + (r-g)*(Prior Period Debt-To-GDP Ratio) Where: r = Average interest rate on government debt and g = Nominal GDP growth The equation highlights that expectations of a persistently rising debt-to-GDP ratio must occur either because of expectations of a persistent primary deficit, or expectations that interest rates will persistently exceed the rate of economic growth (or some combination of the two). This underscores why debt sustainability analysis often focuses on the primary budget balance, as a country’s debt-to-GDP ratio will be stable if no primary deficit exists and interest costs are at or below the prevailing rate of economic growth. Chart II-3 illustrates the source of the CBO’s projected rise in debt-to-GDP beyond 2031, by presenting the two components of the debt sustainability equation alongside the projected annual change in the debt-to-GDP ratio. The chart makes it clear that while the CBO is forecasting a sizeable primary deficit to continue, it is projected to grow at a slower pace than the debt-to-GDP ratio itself. The increasing rate at which the debt-to-GDP ratio is projected to grow in the latter years of the CBO’s forecast period is clearly driven by the interest rate component, meaning that “r” is projected to be greater than “g”. Chart II-4 presents this point directly, by highlighting that the CBO is forecasting the average interest rate on government debt to exceed that of nominal GDP growth in 2038, and to continue to exceed growth (by an increasing amount) thereafter. Chart II-3Decomposing The CBO's Projected Change In The Debt-To-GDP Ratio Chart II-4The CBO's Projections Rest, In Part, On Rates Eventually Exceeding Growth   Three Adjustments To The CBO’s Baseline We make three adjustments to the CBO’s baseline in order to assess how the US fiscal outlook shifts under an interest rate path that is different than that projected by the CBO. First, we adjust the CBO’s projected budget deficit over the coming few years based on deficit forecasts from our US Political Strategy service following the passage of the American Recovery Plan act.3 Chart II-5We Test The Effect Of An Initially Higher, But More Sustainable, Rate Path Next, we adjust the interest component of the total budget deficit based on a new path for short- and long-term interest rates that models a scenario in which the neutral rate of interest rises to, but not above, GDP growth (Chart II-5). In last month’s report we outlined a scenario in which this could feasibly occur,1 and the hypothetical path for interest rates shown in Chart II-5 thus incorporates both the negative budgetary impact of an earlier rise in interest rates and the positive budgetary impact of “r” never rising above “g”. We explicitly exclude any crowding out effect on long-term interest rates, based on the view that term premia are likely to remain muted in a world of low potential economic growth, unless a fiscal crisis appears to be imminent (see Box II-1). Box II-1 Arguing Against The CBO’s Crowding Out Assumption The CBO’s projection that interest rates will ultimately rise above the rate of economic growth rests on the view that increased government spending will absorb savings that would otherwise finance private investment (a “crowding out” effect). We agree that crowding out can occur over the course of the business cycle, especially in a scenario where increased government spending pushes output above its potential (creating a cyclical acceleration in inflation and eventually an increase in interest rates). But the CBO is assuming that high government debt-to-GDP ratios will crowd out private investment on a structural basis, and on this basis we disagree. First, Chart Box II-1 highlights that there is essentially no empirical relationship across countries between a country’s debt-to-GDP ratio and its long-term government bond yield. Japan is a clear outlier in the chart, but including Japan implies that the relationship is negative, not positive. Chart Box II-1There Is No Empirical Relationship Between Debt-To-GDP And Interest Rates In addition, given that central banks directly control interest rates at the short-end of the curve, a structural crowding out effect can only manifest itself in the form of an elevated term premium embedded in longer-term government bond yields. Our bet is that term premia are likely to stay low in a world of low falling nominal growth, as evidenced by the experience of the past decade.4 Finally, we model the impact of two changes, beginning in 2031, that would work towards reducing the primary deficit: an increase in average government revenue to 20% of GDP (its peak level reached in 2000), and a slower pace of increase on major health care program spending. Despite the fact that population aging will increase mandatory spending on social security and health care over the coming three decades, the CBO has highlighted that the majority of the increase in spending towards these programs is projected to occur due to rising health care costs per person (Chart II-6). We thus model the impact of medical care cost control by limiting the rise in net mandatory outlays on health care programs between 2021 and 2051 to roughly half of what the CBO baseline projects. This adjustment does not prevent mandatory spending on health care programs from rising, given the strong political challenges involved in limiting spending increases that are caused by an aging population. Chart II-6The US Structural Primary Balance Is Heavily Impacted By Medical Costs Charts II-7 and II-8 illustrate how these three adjustments impact the long-term US fiscal outlook. Relative to the CBO’s baseline projections, the American Recovery Plan (ARP) budget deficit forecasts from our US Political Strategy service imply that the debt-to-GDP ratio will be approximately three to four percentage points higher over the very near term, and roughly ten points higher over the long term. Chart II-7Even With Higher Rates, The Fiscal Outlook Is Meaningfully Less Bad… Relative to this new baseline, an increase in interest rates to, but not above, the projected rate of nominal economic growth increases the debt-to-GDP ratio by an additional ten percentage points (20 points higher versus the CBO’s baseline) in the middle of the forecast period, but it lowers the debt-to-GDP ratio over the longer run by eliminating the effect of outsized interest rates magnifying a persistent primary deficit. Still, the debt-to-GDP ratio is projected to rise to a whopping 207% of GDP by 2051 in this scenario, with a budget deficit in excess of 10% of GDP. The third adjustment shown in Charts II-7 and II-8 underscores the impact on the US fiscal outlook of actions aimed at reducing the primary deficit. Increases in government revenue and the prevention of rising health care costs per person results in the debt-to-GDP ratio that is 64 percentage points lower in 2051 than in our normalized interest rate scenario. The budget deficit in this scenario still increases to approximately 6% of GDP thirty years from today, but in this case most of the deficit is due to the net interest component rather than the primary deficit, meaning that the debt-to-GDP ratio would be increasing at a much slower rate if interest rates were no higher than the rate of economic growth. Chart II-8 highlights that net interest spending in this scenario would rise to 4.5% of GDP, which would be meaningfully higher than the prior high of roughly 3% in the late 1980s and early 1990s. Chart II-8...With Higher Taxes And Medical Cost Control Chart II-9A Meaningful, But Not Unprecedented, Rise In Net Interest Outlays But that is far from unprecedented or necessarily consistent with a fiscal crisis. Chart II-9 also shows that Canada’s public debt charges rose to 6.5% of GDP in the early 1990s without triggering a public debt crisis. It is true that Canada subsequently embarked on a painful fiscal consolidation program in order to reduce its public debt burden, but this, in part, occurred because of a cyclically-adjusted primary deficit of approximately 3% - twice as large as that projected for the US in 2051 in our adjusted scenario shown in Charts II-7 and II-8. Revenue And Health Care Cost Reform Our third adjustment to the CBO’s long-term budget outlook involved changes to revenue and health care cost control to reduce the US’ projected primary deficit. Are these adjustments achievable? In our view, the answer is yes: As noted above, our scenario modeled these changes taking place a decade from today, which allows for policymakers and stakeholders to have a substantial amount of time to act and adjust to these changes. On the revenue front, we noted above that US government revenue has reached 20% of GDP in the past, in the year 2000. Chart II-10 highlights that while raising taxes will likely reduce US competitiveness, the US maintains a sizeable tax advantage relative to other advanced economies, and that this was true prior to the tax cuts that took place under the Trump administration. On the health care cost front, Chart II-11 highlights that US healthcare expenditure is much larger as a share of GDP than other countries, which was not the case prior to the 1980s. Chart II-12 highlights that this cost difference is entirely due to inpatient (i.e., hospital) and outpatient (i.e., drug) costs. While it is not clear what form it will take, it seems likely that future reforms by policymakers to eliminate rising health care costs per person will occur and can be achieved. Chart II-10The US Government Can Afford To Raise Revenue Chart II-11The US Spends Much More On Health Care Than Other Countries   Chart II-12The US Significantly Outspends The World On Hospital And Drug Costs The key point for investors is not whether these changes should or should not occur, but whether there are any feasible scenarios in which spiraling government debt and interest payments are avoided without the Fed purposely maintaining monetary policy at levels persistently below the rate of economic growth – and thus risking major inflationary pressure. Our analysis above highlights that there are; the question is when policymakers will choose to act and in what form. A potential tipping point may be when US government spending on net interest as a % of GDP exceeds its prior high, which occurs in 2026 in the scenario modeled in Chart II-8. In a scenario where reforms fail to materialize or where financial markets force policymakers to act, a fiscal risk premium could certainly emerge in longer-term government bond yields, which could lead the Fed to maintain lower short-term interest rates than it otherwise would. But this scenario is only likely to emerge after interest rates converge towards rates of economic growth, as US government debt will remain highly serviceable for some time if "r" remains meaningfully lower than "g". Investment Conclusions There are three potential investment implications of our research. First, the fact that rising medical costs have such a significant impact on the CBO’s projections of the primary deficit implies that fiscal reform, when it eventually occurs, will be negative for US health care stocks. Chart II-13 highlights that US health care sector earnings have outperformed broad market earnings since the mid-1990s, and that the sector has consistently delivered an above-average return on equity. This historical performance likely reflects the sector’s pricing power, which stand to be curtailed through regulatory efforts in a world where rising health care costs per person collide with fiscal belt-tightening. Interestingly, Chart II-12 highlighted that US per capita spending on medical goods is not significantly higher than in other developed markets, suggesting that the health care equipment & supplies industry may fare better over a very long term time horizon than overall health care. Second, Charts II-7 and II-8 highlighted that even if the US does raise revenue as a share of GDP and limits excessive growth in medical costs, a primary deficit will still exist and net interest outlays will still rise to elevated levels compared to what has historically been the case. We noted that Canada experienced a higher public debt burden in the 1990s and did not suffer from a fiscal crisis, but Chart II-14 highlights that the fiscal situation did weigh on the Canadian dollar, which progressively traded 10-20% below its PPP-implied fair value level over the course of the 1990s. Thus, the implication is that eventual fiscal reform in the US may be structurally negative for the US dollar, from an overvalued starting point (panels 3 and 4 of Chart II-14). Chart II-13Eventual Fiscal Reform Will Likely Be Negative For Health Care Stocks Chart II-14The US Fiscal Outlook, Even With Some Reforms, Is Dollar-Negative   Finally, our scenario analysis highlights that very elevated levels of government debt do not guarantee that interest rates will remain structurally low, especially over the next decade when the US primary deficit is projected to remain relatively stable. For investors focused on forecasting the direction of 10-year Treasury yields from the perspective of valuation, it should be noted that the next decade is the relevant projection period for the Fed funds rate, not what occurs to net interest outlays in the two decades that follow. Over the very long run, it is true that there may ultimately be very strong political pressure on the Fed to keep interest rates below the prevailing rate of economic growth, as policymakers in 2030 will be able to avoid a structural adjustment to the primary deficit of roughly 1.1-1.3% of GDP for every percentage point that average interest rates on government debt are below nominal GDP growth. However, we noted above that this pressure is unlikely to build before the second half of this decade even in a scenario where interest rates rise significantly over the coming few years, and it remains an open questions whether the Fed will acquiesce to this pressure given its strong potential to fuel excess private sector leveraging. Over the coming one to two years, the key conclusion is that the US fiscal outlook is not likely to prevent an increase in interest rates over the coming few years in the hypothetical scenario that we described in last month’s report, i.e., an environment where the narrative of secular stagnation is challenged and investor expectations for the neutral rate rise closer to trend rates of economic growth. This remains a risk to our overweight stance towards risky assets and is not our base case view. But it does highlight the importance of monitoring long-dated rate expectations over the coming year, and argues, on a risk-adjusted basis, for a below-neutral duration stance within a fixed-income portfolio. Jonathan LaBerge, CFA Vice President The Bank Credit Analyst Footnotes 1 Please see The Bank Credit Analyst Special Report "R-star, And The Structural Risk To Stocks," dated March 31, 2021, available at bca.bcaresearch.com 2 Presented in this fashion, a budget deficit (surplus) is recorded with a positive (negative) sign. 3 For more information, please see US Political Strategy report “Biden’s Pittsburgh Speech And Legislative Agenda,” dated April 1, 2021, available at usp.bcaresearch.com 4 Please see “Term premia: models and some stylised facts”, by Cohen, Hördahl, and Xia, BIS Quarterly Review, September 2008.

Highlights Developed economies continue to transition towards a post-pandemic state. Europe has further to go, but it is lagging the US at a constant rate and is thus merely delayed – not on a different path. This ongoing transition is also reflected in the global macro data, which continues to surprise to the upside. Widespread optimism about the outlook for economic activity and earnings over the coming year has led some investors to ask whether an imminent peak in the rate of growth could be a potentially negative inflection point for richly valued risky asset prices. Using our global leading economic indicator as a guide, we find that a peak in growth momentum in and of itself is not likely to be enough of a catalyst for meaningful risky asset underperformance versus government bonds. A sizeable shock to sentiment would likely be required, causing either a very serious growth slowdown, outright fears of recession, or some other event that negatively impacts earnings growth or raises the equity risk premium (“ERP”). We can identify several candidates for such a shock, including the emergence of new, vaccine-resistant variants of COVID-19, the impact of higher taxes on earnings, overtightening in China, and a potentially hawkish shift in monetary policy in the developed world. But none of these risks individually appears to be likely enough to warrant reducing cyclical portfolio exposure. We continue to expect positive absolute single-digit returns from stocks over the coming 6-12 months, and would recommend that investors remain overweight stocks versus bonds in a multi-asset portfolio. We remain overweight global ex-US equities vs. the US, but expect that euro area stocks will have to do the heavy lifting, driven either by the underperformance of global technology stocks or the outperformance of euro area financials. Within a fixed-income portfolio, we recommend a modestly short duration stance, but do so primarily on a risk-adjusted basis. Feature Chart I-1Europe Is Behind The US, But On The Same Path Over the past month, developed economies have continued to transition towards a post-pandemic state. While the number of new confirmed COVID-19 cases remains relatively high on a per capita basis in the US and Europe, there continues to be significant progress on the vaccination front in all Western advanced economies. Europe continues to lag the US and the UK in terms of the share of the population that has received at least one dose of vaccine, but Chart I-1 highlights that the gap has remained constant at approximately six weeks (to the US). Panel 2 of Chart I-1 highlights that the US and UK both experienced either falling or a stable number of new cases once the number of first doses reached current European levels; Israel required significant further gains in the breadth of vaccinations before it altered COVID-19’s transmission dynamics in that country, but this appears to have occurred because of a much higher pace of spread earlier this year. The negative impact on advanced economies from reduced services activity is strongly linked to pandemic control measures (such as stay-at-home orders, curfews, forced business closures, etc). We have argued that, outside of the US, the implementation and removal of these measures is being driven by the impact of the pandemic on the medical system, rather than the sheer number of new cases and deaths. Chart I-2 highlights that, based on this framework, Europe still has further to go – current per capita hospitalizations remain much higher in France and Italy than in the US, UK, or Canada. But the nature of the disease means that hospitalizations begin to fall even if case counts remain relatively stable, and fall rapidly once new cases trend lower. Given the steady gains that European countries are making in providing first vaccine doses to their populations, it seems likely that hospitalizations there will peak sometime in the coming four to six weeks. This underscores that Europe is not on a different path than that of the US, it is simply further behind in the process (and will ultimately catch up). The transition towards a post-pandemic state is also reflected in the global macro data, which continues to positively surprise in all three major economies (Chart I-3). In Europe, the April services PMI rose back above the 50 mark, April consumer confidence surprised to the upside, and February retail sales came in better than expected (Table I-1). In the US, the March services PMI was also very strong, the labor market continued to meaningfully improve, and several measures of inflation surprised to the upside. Chart I-2Euro Area Hospitalizations Remain High, But Will Soon Decline Chart I-3The Macro Data Continues To Positively Surprise   Table I-1Services PMIs And The Labor Market Continue To Meaningfully Improve Chart I-4China's Current Contribution To Global Demand Is Strong In China, the recent tick higher in the surprise index likely reflects the recognition of some data series whose release was delayed due to the Chinese New Year, as well as significant base effects (compared with Q1 2020) in many data series recorded in year-over-year terms. On a quarter-over-quarter basis, Chinese economic activity decelerated last quarter to 0.6% from the upwardly revised 3.2% in Q4 2020 – which was below the anticipated 1.4% q/q. Still, Chinese RMB-denominated import growth closely matches (lagging) data on global exports to China (in US$ terms), with the former suggesting that China’s current contribution to global external demand remains strong (Chart I-4). This is also consistent with rising producer prices, which had fallen back into deflationary territory last year (panel 2). Peaking Growth Momentum: Should Investors Be Worried? The continued increase in the number of vaccine doses administered, positive data surprises, and bullish global growth forecasts for this year have understandably led to extremely optimistic investor sentiment. It has also naturally raised the question of “what could go wrong?”, with some investors pointing to an imminent peak in the rate of growth as a potentially negative inflection point for richly valued risky asset prices. Chart I-5 addresses this question by examining 12 episodes of waning growth momentum since 1990, defined as an identifiable peak in our global leading economic indicator. Panel 2 shows the 12-month rate of change in the relative performance of global equities versus a US$-hedged 7-10 year global Treasury index. Chart I-5Is Peaking Growth Momentum A Risk For Stocks? At first blush, the chart does support the notion that a peak in growth momentum is generally negative for risky asset prices. The subsequent 12-month relative return from stocks versus bonds following a peak in the LEI has been negative in 8 out of the 12 episodes, suggesting that the risks of an equity correction are currently quite elevated. However, there is more to the story than this simple calculation implies (Table I-2). First, two of the twelve episodes saw the global LEI peak in the context of an eventual US recession, so it is not surprising that stocks underperformed bonds in those episodes. Second, out of the six non-recessionary episodes, only two of them involved significant underperformance, in 2002 and in 2015. Table I-2Peak Growth Momentum Is An Insufficient Catalyst For Equity Underperformance US equities underperformed in the former case because of the persistently damaging impact of corporate excesses that built up during the dot-com bubble, and predominantly global ex-US equities underperformed bonds in the latter case because of a combination of the significant impact on global CAPEX from the 2014 dollar and oil price shock, as well as a major decline in global bond yields. In the four other non-recessionary examples of equity underperformance, stocks only modestly underperformed bonds, and often this occurred in the context of significant events: surprising Fed hawkishness in 1994, the Asian financial crisis in 1997, a major slowdown in China in 2013, and the combination of a domestically-driven Chinese economic slowdown coupled with the Sino/US trade war in 2017/2018. The key point for investors is that a peak in growth momentum is in and of itself not enough of a catalyst for meaningful risky asset underperformance versus government bonds. A sizeable shock to sentiment would likely be required, causing either a very serious growth slowdown, outright fears of recession, or some other event that negatively impacts earnings growth or raises the equity risk premium (“ERP”). What Else Could Go Wrong? There are four other plausible risks that we can identify to a bullish stance towards risky assets over the coming 6-12 months. We discuss each of these risks below. New COVID-19 Variants Chart I-6 highlights that bottom up analysts expect global earnings per share to be 12% higher than their pre-pandemic level in 12-months’ time. This expectation is driven by extraordinarily easy fiscal and monetary policy, but also the view that vaccination against COVID-19 will allow social distancing policies to end and services activity to fully recover. However, as India is clearly – and tragically – demonstrating at present, the emerging world is lagging in terms of vaccinating its population. India’s per capita case count has soared (Chart I-7), which is surprising given that the country’s COVID-19 infection rate has been significantly below that of more advanced economies over the past year. It is therefore likely that India’s case count explosion is due to new variants of the disease, and periodic outbreaks in less developed countries – as well as vaccine hesitancy in more developed economies – risks the emergence of even newer variants that may be partially or substantially vaccine-resistant. Chart I-6Earnings Expectations Already Price In A Normalization In Services Activity Chart I-7India's COVID-19 Situation Is Tragic, And Concerning   New variants of COVID-19 may prove to be less deadly, but the economic impact of the pandemic has come mainly from its potential to collapse the medical system via high rates of serious illness requiring hospitalization, not strictly from its lethality. As such, potentially new vaccine-resistant variants of the disease resulting in similar or higher rates of hospitalization pose a risk to a bullish economic outlook. Taxation Both corporate and individual tax rates are set to rise in the US over the coming 12-18 months which, at first blush, could certainly qualify as a non-recessionary event that negatively impacts earnings or raises the ERP. Corporate taxes are set to rise first as part of the American Jobs Plan, which our political strategists have argued will probably take the Biden administration most of this year to pass. The plan involves a proposed increase in the domestic corporate income tax rate to 28% from 21%, a higher minimum tax on foreign profits, and a 15% minimum tax on “book income”. In addition, as part of the American Families Plan, Biden is proposing to increase the top marginal income tax rate for households earning $400,000 or more to 39.6% (from 37%), and to substantially increase the capital gains tax rate for those earning $1 million or more from a base rate of 20% to 39.6%. The 3.8% tax on investment income that funds Obamacare would be kept in place, which would bring the total capital gain tax rate to 43.4% for that income group. Peter Berezin, BCA’s Chief Global Strategist, made two points about higher corporate taxes in a recent report.1 First, he noted that the changes would likely result in an 8% decline in forward earnings if passed as currently proposed, but that various tax credits as well as opposition to a 28% corporate tax rate from Democratic Senator Joe Manchin would likely cap the impact at 5%. Second, he argued that the behavior of 12-month forward earnings and the performance of stocks that benefitted the most from President Trump’s corporate tax cuts suggest that very little impact from these changes has been priced in. Peter argued in his report that the effect of strong economic growth will likely offset the negative impact of higher taxes on earnings, and we are inclined to agree. Chart I-8 highlights that a 5% reduction in 12-month forward earnings would reduce the equity risk premium by roughly 20-25 basis points, which would not be disastrous on its own. Still, the fact that these changes have not been priced in means that corporate tax hikes could be a more meaningful driver of lower stock prices if the impact is ultimately larger than we currently expect or if the growth outlook suddenly shifts in a negative direction. In terms of changes to individual taxes, our sense is that the proposed increase in the capital gains tax rate is more significant than the modest proposed change to the top marginal income tax rate for higher-income households. For individuals earning $1 million or more, Chart I-9 highlights that the proposed change to the capital gains rate would bring it to the highest level seen since the late 1970s. Given the rich valuation of equities, it seems inconceivable that such a change would not trigger some short-term selling of equities to lock in long-term gains at lower tax rates. Chart I-8Higher Corporate Taxes Will Only Modestly Reduce the Equity Risk Premium Chart I-9Biden's Capital Gains Tax Proposal Would Lead To Some Selling Of Stocks...   But like upcoming changes to corporate taxes, we see the potential for higher taxes on wealthy individuals as a risk to the equity market and not as a likely driver of stock prices over a cyclical time horizon. First, our political strategists see 50/50 odds that the American Families Plan will be passed this year, meaning that short-term tax avoidance selling may be postponed until 2022. In addition, Chart I-10 highlights that over the longer term, the relationship between the maximum capital gains tax rate and the ERP is weak or nonexistent. The chart highlights that the perception of a positive relationship rests entirely on the second half of the 1970s, when the maximum capital gains tax rate was between 30-40%. However, it seems clear from the chart that the stagflationary environment of that period was responsible for a high ERP, as the capital gains rate fell from 1977 to 1982 without any significant decline in risk premia. It took until the end of the 1982 recession and the beginning of the structural disinflationary period for the equity risk premium to decline, suggesting that there is effectively no relationship between the two (and therefore no reason to believe that higher capital gains taxes will lead to sustained declines in stock market multiples). Chart I-10…But The Effect Would Not Likely Last Overtightening In China Chart I-11Leading Indicators Of China's Economy Are Pointing Down, Not Up Even though Chart I-4 highlighted that Chinese import demand is currently strong, we expect China’s growth impulse to weaken in the second half of the year. Chart I-11 highlights that our leading indicator for China’s Li Keqiang index has done a good job of predicting Chinese import growth, and the indicator is now in a clear downtrend. Panel 2 presents the components of the indicator, and shows that all three are trending lower. Monetary conditions are potentially rebounding from extremely weak levels (due to past deflation and a rise in the RMB versus the US dollar and other Asian currencies), but money supply and credit measures are deteriorating. Leading indicators for China’s economy are deteriorating because Chinese policymakers have already tightened liquidity conditions in response to the country’s rebound from the pandemic and following a surge in the credit impulse. The 3-month repo rate returned to pre-pandemic levels in the second half of last year (Chart I-12), and consequently the private sector credit impulse (particularly that of corporate bond issuance) fell despite robust medium-to-long term loan growth. Chart I-12Chinese Interest Rates Have Already Returned To Pre-COVID Levels We noted in our January report that China’s credit impulse has consistently followed a 3½-year cycle since 2010, and this year has been no different. This cycle is not exogenous or mystical; it has been caused by the repeated “oversteering” of activity by Chinese policymakers who frequently oscillate between the need to fight deflation and the strong desire to curb additional private sector leveraging. Our base case view is that policymakers will not accidentally overtighten the economy, and that the credit impulse will settle somewhere between late 2019 levels and the peak rate reached in the latter half of last year. But the risk of significant oversteering cannot be ruled out, and will likely remain a downcycle risk for investors for several years to come. A Hawkish Shift In Monetary Policy In Developed Markets Last week the Bank of Canada announced that it would taper its pace of government debt purchases from 4 billion to 3 billion CAD per week. The announcement was noteworthy for many investors, as it suggested that asset purchase reductions could also be announced by the Fed and other major central banks by the end of the second or third quarter. Many investors are sensitive to the tapering question because of what transpired during the “Taper Tantrum” episode of 2013. During an appearance before Congress in late May of that year, then Chair Ben Bernanke stated that the Fed could “step down” the pace of its asset purchases in the next few FOMC meetings if economic conditions continued to improve. The result was that 10-year Treasurys fell roughly 10% in total return terms over the subsequent three-month period. While stocks rallied in response to the growth-positive implications of the move, this occurred from a much higher ERP starting point than exists today. The risk, in the minds of some investors, is that tapering today could thus lead to a correction in stock prices. There are two counterpoints to this view. First, bonds have already sold off meaningfully over the past several months in response to a significant improvement in the economic outlook, and investors already expect the Fed to raise interest rates earlier than it is publicly forecasting. It is thus difficult to see how an announcement of tapering from the Fed would significantly alter the outlook for monetary policy over the coming 6-18 months. Chart I-13Another Taper Tantrum-Like Selloff Would Necessitate Higher Expectations For R-star Second, it is notable that the “Taper Tantrum” began at yield levels at the front end of the curve that are roughly similar to what prevails today. 5-year/5-year forward bond yields stood at roughly 3% at the beginning of the “Tantrum”, compared with 2.3% today. Chart I-13 highlights how high forward bond yields would need to rise in order to generate another selloff of similar magnitude from 10-year Treasury yields (roughly 3.65%). In our view, a rise to this level over the coming year is essentially impossible without a major shift in investor expectations about the natural rate of interest. We highlighted the risk of such a shift in last month’s report,2 but for now it would likely necessitate hard evidence of little-to-no permanent damage to the labor market from the pandemic. This is not our base case view, but it will be an important possibility to monitor as the decisive end to social distancing and other pandemic control measures draws nearer. Investment Conclusions As noted above, there are several identifiable risks to a bullish outlook for risky assets, but none of these risks individually appear to be likely. Given this, we continue to expect positive absolute single-digit returns from stocks over the coming 6-12 months, and would recommend that investors remain overweight stocks versus bonds in a multi-asset portfolio. We favor value versus growth stocks, cyclical versus defensive sectors, and small versus large cap stocks, although there is more return potential over the coming year in value versus growth than the latter two positions. We also remain short the US dollar over a cyclical time horizon. Within a global equity portfolio, we remain overweight global ex-US equities vs the US, but this position has moved against us over the past two months. Chart I-14 highlights that global ex-US equities have given back all of their October – January gains versus US equities, most of which has occurred since late-February. The chart also highlights that all of this underperformance has been driven by emerging market stocks, as euro area equity performance has been mostly stable year-to-date. Chart I-15 highlights that EM underperformance has occurred both in the broadly-defined tech sector as well as when measured in ex-tech terms. To us, this suggests that EM stocks are responding to the deterioration in leading indicators for the Chinese economy that we noted above, which implies that they are not likely to lead global ex-US equity performance higher over the course of the year barring an imminent shift in Chinese policy. We continue to expect that euro area stocks will have to do the heavy lifting, driven either by the underperformance of global technology stocks or the outperformance of euro area financials – which are extremely cheap relative to US banks and have much further scope for earnings to normalize as the pandemic draws to a close. Chart I-14Emerging Markets Have Caused Global Ex-US Stocks To Underperform Chart I-15EM's Underperformance Has Been Broad-Based   As a final point, investors should note that we are recommending a modestly short duration stance within a fixed-income portfolio, but that we make this recommendation primarily on a risk-adjusted basis. Chart I-16 highlights that Treasury market excess returns (relative to cash) have historically been driven by whether the Fed funds rate increases by more or less than what is currently priced into the market. Over the past 12 months, the Treasury index has very substantially underperformed cash without a hawkish surprise, and the rate path that is currently implied by the OIS curve is already more hawkish than the Fed is (for now) projecting. On this basis, a neutral duration stance could be justified, but we would still prefer a modestly short duration stance due to the risk of a potential increase in investor expectations for the neutral rate of interest late this year or in early 2022. Chart I-16Policy Rate Surprises Tend To Drive The Duration Call Jonathan LaBerge, CFA Vice President The Bank Credit Analyst April 29, 2021 Next Report: May 27, 2021   II. In COVID’s Wake: Government Debt And The Path Of Interest Rates The US fiscal outlook has deteriorated substantially over the past two decades, as a consequence of the fiscal response to both the global financial crisis and the COVID-19 pandemic. US government debt-to-GDP is now nearly as high as it was at the end of the Second World War, and is projected by the US Congressional Budget Office (CBO) to explode higher over the coming 30 years. Some investors argue that extreme levels of government debt now virtually guarantee that interest rates will remain structurally low, and we test this claim alongside a scenario that limits the projected rise in the primary deficit. We find that US fiscal reform, when it eventually occurs, will likely be negative for health care stocks. We also note that even in a scenario where the US limits the size of its future primary budget deficit, net interest outlays will likely rise to elevated levels compared to history. A comparison with the Canadian experience in the 1990s suggests a structurally negative outlook for the US dollar, from an overvalued starting point. Finally, we note that the US fiscal outlook does not necessarily prevent an increase in interest rates over the coming few years in a scenario where investors raise their expectations for the neutral rate of interest, a possibility that we discussed in last month’s report. This scenario is not our base case view, but it is plausible and should actively be monitored by investors over the coming one to two years. For now, we do not expect that rising interest rates pose a risk to stocks over the coming 6-12 months. Investors should remain cyclically overweight equities within a multi-asset portfolio, and should maintain a below-benchmark level of duration on a risk-adjusted basis. In 2001, US government debt held by the public as a share of GDP stood at 31.5%, after having fallen roughly 16 percentage points from early 1993 levels. Today, as a result of both the global financial crisis and the COVID-19 pandemic, the debt to GDP ratio has risen to a whopping 100%, and is projected to rise meaningfully higher over the coming decades. In this report we review the long-term US fiscal outlook in the wake of the pandemic, with a focus on the implications for interest rates. Some investors argue that extreme levels of government debt now virtually guarantee that interest rates will remain structurally low, and we test this claim alongside a scenario that limits the projected rise in the primary deficit. We find that US fiscal reform, when it eventually occurs, will likely be negative for health care stocks, whose fundamental performance has outstripped that of the broad equity market since the mid-1990s (reflecting pricing power that stands to be curtailed through regulation). We also note that even in a scenario where the US limits the size of its future primary budget deficit, net interest outlays will likely rise to elevated levels compared to history. A comparison with the Canadian experience in the 1990s suggests a structurally negative outlook for the US dollar, from an overvalued starting point. Finally, we note that the US fiscal outlook does not necessarily prevent an increase in interest rates over the coming few years in the hypothetical scenario that we described in last month’s report,3 i.e., an environment where the narrative of secular stagnation is challenged and investor expectations for the neutral rate rise closer to trend rates of economic growth. This scenario is not our base case view, but it is plausible and should actively be monitored by investors over the coming one to two years. For now, investors should remain cyclically overweight equities within a multi-asset portfolio, and should maintain a below-benchmark level of duration on a risk-adjusted basis. Debt Sustainability, And The CBO’s Baseline Projection When analyzing the US fiscal outlook, the Congressional Budget Office’s Long-Term Budget Outlook report is typically the reference point for investors. The report provides annual projections for the budget deficit and the debt-to-GDP ratio for the next three decades, as well as a breakdown of the projected deficit into its primary (i.e., non-interest) and net interest components. Charts II-1 and II-2 present the most recent baseline projections from the CBO, which clearly present a dire long-term outlook. The deficit and debt-to-GDP ratio are projected to be relatively stable over the next decade, but explode higher over the subsequent 20 years. In 2051, the CBO’s baseline projects that the budget deficit will be roughly 13% of GDP, with net interest costs accounting for approximately two-thirds of the deficit. Chart II-1The CBO’s Fiscal Outlook Is Extremely Negative Chart II-2In 2051, The CBO Projects A 13% Annual Budget Deficit In order to understand what is driving the CBO’s dire long-term budget and debt forecast, it is important to review the government debt sustainability equation shown below. The equation highlights that the change in a government’s debt-to-GDP ratio is approximately equal to 1) the primary deficit plus 2) net interest costs as a share of GDP, the latter being defined as the product of last year’s debt-to-GDP ratio and the difference between the average interest rate on the debt and the rate of GDP growth. Δ Debt-To-GDP Ratio ≈ Primary Deficit As A % Of GDP4 + (r-g)*(Prior Period Debt-To-GDP Ratio) Where: r = Average interest rate on government debt and g = Nominal GDP growth The equation highlights that expectations of a persistently rising debt-to-GDP ratio must occur either because of expectations of a persistent primary deficit, or expectations that interest rates will persistently exceed the rate of economic growth (or some combination of the two). This underscores why debt sustainability analysis often focuses on the primary budget balance, as a country’s debt-to-GDP ratio will be stable if no primary deficit exists and interest costs are at or below the prevailing rate of economic growth. Chart II-3 illustrates the source of the CBO’s projected rise in debt-to-GDP beyond 2031, by presenting the two components of the debt sustainability equation alongside the projected annual change in the debt-to-GDP ratio. The chart makes it clear that while the CBO is forecasting a sizeable primary deficit to continue, it is projected to grow at a slower pace than the debt-to-GDP ratio itself. The increasing rate at which the debt-to-GDP ratio is projected to grow in the latter years of the CBO’s forecast period is clearly driven by the interest rate component, meaning that “r” is projected to be greater than “g”. Chart II-4 presents this point directly, by highlighting that the CBO is forecasting the average interest rate on government debt to exceed that of nominal GDP growth in 2038, and to continue to exceed growth (by an increasing amount) thereafter. Chart II-3Decomposing The CBO's Projected Change In The Debt-To-GDP Ratio Chart II-4The CBO's Projections Rest, In Part, On Rates Eventually Exceeding Growth   Three Adjustments To The CBO’s Baseline We make three adjustments to the CBO’s baseline in order to assess how the US fiscal outlook shifts under an interest rate path that is different than that projected by the CBO. First, we adjust the CBO’s projected budget deficit over the coming few years based on deficit forecasts from our US Political Strategy service following the passage of the American Recovery Plan act.5 Chart II-5We Test The Effect Of An Initially Higher, But More Sustainable, Rate Path Next, we adjust the interest component of the total budget deficit based on a new path for short- and long-term interest rates that models a scenario in which the neutral rate of interest rises to, but not above, GDP growth (Chart II-5). In last month’s report we outlined a scenario in which this could feasibly occur,3 and the hypothetical path for interest rates shown in Chart II-5 thus incorporates both the negative budgetary impact of an earlier rise in interest rates and the positive budgetary impact of “r” never rising above “g”. We explicitly exclude any crowding out effect on long-term interest rates, based on the view that term premia are likely to remain muted in a world of low potential economic growth, unless a fiscal crisis appears to be imminent (see Box II-1). Box II-1 Arguing Against The CBO’s Crowding Out Assumption The CBO’s projection that interest rates will ultimately rise above the rate of economic growth rests on the view that increased government spending will absorb savings that would otherwise finance private investment (a “crowding out” effect). We agree that crowding out can occur over the course of the business cycle, especially in a scenario where increased government spending pushes output above its potential (creating a cyclical acceleration in inflation and eventually an increase in interest rates). But the CBO is assuming that high government debt-to-GDP ratios will crowd out private investment on a structural basis, and on this basis we disagree. First, Chart Box II-1 highlights that there is essentially no empirical relationship across countries between a country’s debt-to-GDP ratio and its long-term government bond yield. Japan is a clear outlier in the chart, but including Japan implies that the relationship is negative, not positive. Chart Box II-1There Is No Empirical Relationship Between Debt-To-GDP And Interest Rates In addition, given that central banks directly control interest rates at the short-end of the curve, a structural crowding out effect can only manifest itself in the form of an elevated term premium embedded in longer-term government bond yields. Our bet is that term premia are likely to stay low in a world of low falling nominal growth, as evidenced by the experience of the past decade.6 Finally, we model the impact of two changes, beginning in 2031, that would work towards reducing the primary deficit: an increase in average government revenue to 20% of GDP (its peak level reached in 2000), and a slower pace of increase on major health care program spending. Despite the fact that population aging will increase mandatory spending on social security and health care over the coming three decades, the CBO has highlighted that the majority of the increase in spending towards these programs is projected to occur due to rising health care costs per person (Chart II-6). We thus model the impact of medical care cost control by limiting the rise in net mandatory outlays on health care programs between 2021 and 2051 to roughly half of what the CBO baseline projects. This adjustment does not prevent mandatory spending on health care programs from rising, given the strong political challenges involved in limiting spending increases that are caused by an aging population. Chart II-6The US Structural Primary Balance Is Heavily Impacted By Medical Costs Charts II-7 and II-8 illustrate how these three adjustments impact the long-term US fiscal outlook. Relative to the CBO’s baseline projections, the American Recovery Plan (ARP) budget deficit forecasts from our US Political Strategy service imply that the debt-to-GDP ratio will be approximately three to four percentage points higher over the very near term, and roughly ten points higher over the long term. Chart II-7Even With Higher Rates, The Fiscal Outlook Is Meaningfully Less Bad… Relative to this new baseline, an increase in interest rates to, but not above, the projected rate of nominal economic growth increases the debt-to-GDP ratio by an additional ten percentage points (20 points higher versus the CBO’s baseline) in the middle of the forecast period, but it lowers the debt-to-GDP ratio over the longer run by eliminating the effect of outsized interest rates magnifying a persistent primary deficit. Still, the debt-to-GDP ratio is projected to rise to a whopping 207% of GDP by 2051 in this scenario, with a budget deficit in excess of 10% of GDP. The third adjustment shown in Charts II-7 and II-8 underscores the impact on the US fiscal outlook of actions aimed at reducing the primary deficit. Increases in government revenue and the prevention of rising health care costs per person results in the debt-to-GDP ratio that is 64 percentage points lower in 2051 than in our normalized interest rate scenario. The budget deficit in this scenario still increases to approximately 6% of GDP thirty years from today, but in this case most of the deficit is due to the net interest component rather than the primary deficit, meaning that the debt-to-GDP ratio would be increasing at a much slower rate if interest rates were no higher than the rate of economic growth. Chart II-8 highlights that net interest spending in this scenario would rise to 4.5% of GDP, which would be meaningfully higher than the prior high of roughly 3% in the late 1980s and early 1990s. Chart II-8...With Higher Taxes And Medical Cost Control Chart II-9A Meaningful, But Not Unprecedented, Rise In Net Interest Outlays But that is far from unprecedented or necessarily consistent with a fiscal crisis. Chart II-9 also shows that Canada’s public debt charges rose to 6.5% of GDP in the early 1990s without triggering a public debt crisis. It is true that Canada subsequently embarked on a painful fiscal consolidation program in order to reduce its public debt burden, but this, in part, occurred because of a cyclically-adjusted primary deficit of approximately 3% - twice as large as that projected for the US in 2051 in our adjusted scenario shown in Charts II-7 and II-8. Revenue And Health Care Cost Reform Our third adjustment to the CBO’s long-term budget outlook involved changes to revenue and health care cost control to reduce the US’ projected primary deficit. Are these adjustments achievable? In our view, the answer is yes: As noted above, our scenario modeled these changes taking place a decade from today, which allows for policymakers and stakeholders to have a substantial amount of time to act and adjust to these changes. On the revenue front, we noted above that US government revenue has reached 20% of GDP in the past, in the year 2000. Chart II-10 highlights that while raising taxes will likely reduce US competitiveness, the US maintains a sizeable tax advantage relative to other advanced economies, and that this was true prior to the tax cuts that took place under the Trump administration. On the health care cost front, Chart II-11 highlights that US healthcare expenditure is much larger as a share of GDP than other countries, which was not the case prior to the 1980s. Chart II-12 highlights that this cost difference is entirely due to inpatient (i.e., hospital) and outpatient (i.e., drug) costs. While it is not clear what form it will take, it seems likely that future reforms by policymakers to eliminate rising health care costs per person will occur and can be achieved. Chart II-10The US Government Can Afford To Raise Revenue Chart II-11The US Spends Much More On Health Care Than Other Countries   Chart II-12The US Significantly Outspends The World On Hospital And Drug Costs The key point for investors is not whether these changes should or should not occur, but whether there are any feasible scenarios in which spiraling government debt and interest payments are avoided without the Fed purposely maintaining monetary policy at levels persistently below the rate of economic growth – and thus risking major inflationary pressure. Our analysis above highlights that there are; the question is when policymakers will choose to act and in what form. A potential tipping point may be when US government spending on net interest as a % of GDP exceeds its prior high, which occurs in 2026 in the scenario modeled in Chart II-8. In a scenario where reforms fail to materialize or where financial markets force policymakers to act, a fiscal risk premium could certainly emerge in longer-term government bond yields, which could lead the Fed to maintain lower short-term interest rates than it otherwise would. But this scenario is only likely to emerge after interest rates converge towards rates of economic growth, as US government debt will remain highly serviceable for some time if "r" remains meaningfully lower than "g". Investment Conclusions There are three potential investment implications of our research. First, the fact that rising medical costs have such a significant impact on the CBO’s projections of the primary deficit implies that fiscal reform, when it eventually occurs, will be negative for US health care stocks. Chart II-13 highlights that US health care sector earnings have outperformed broad market earnings since the mid-1990s, and that the sector has consistently delivered an above-average return on equity. This historical performance likely reflects the sector’s pricing power, which stand to be curtailed through regulatory efforts in a world where rising health care costs per person collide with fiscal belt-tightening. Interestingly, Chart II-12 highlighted that US per capita spending on medical goods is not significantly higher than in other developed markets, suggesting that the health care equipment & supplies industry may fare better over a very long term time horizon than overall health care. Second, Charts II-7 and II-8 highlighted that even if the US does raise revenue as a share of GDP and limits excessive growth in medical costs, a primary deficit will still exist and net interest outlays will still rise to elevated levels compared to what has historically been the case. We noted that Canada experienced a higher public debt burden in the 1990s and did not suffer from a fiscal crisis, but Chart II-14 highlights that the fiscal situation did weigh on the Canadian dollar, which progressively traded 10-20% below its PPP-implied fair value level over the course of the 1990s. Thus, the implication is that eventual fiscal reform in the US may be structurally negative for the US dollar, from an overvalued starting point (panels 3 and 4 of Chart II-14). Chart II-13Eventual Fiscal Reform Will Likely Be Negative For Health Care Stocks Chart II-14The US Fiscal Outlook, Even With Some Reforms, Is Dollar-Negative   Finally, our scenario analysis highlights that very elevated levels of government debt do not guarantee that interest rates will remain structurally low, especially over the next decade when the US primary deficit is projected to remain relatively stable. For investors focused on forecasting the direction of 10-year Treasury yields from the perspective of valuation, it should be noted that the next decade is the relevant projection period for the Fed funds rate, not what occurs to net interest outlays in the two decades that follow. Over the very long run, it is true that there may ultimately be very strong political pressure on the Fed to keep interest rates below the prevailing rate of economic growth, as policymakers in 2030 will be able to avoid a structural adjustment to the primary deficit of roughly 1.1-1.3% of GDP for every percentage point that average interest rates on government debt are below nominal GDP growth. However, we noted above that this pressure is unlikely to build before the second half of this decade even in a scenario where interest rates rise significantly over the coming few years, and it remains an open questions whether the Fed will acquiesce to this pressure given its strong potential to fuel excess private sector leveraging. Over the coming one to two years, the key conclusion is that the US fiscal outlook is not likely to prevent an increase in interest rates over the coming few years in the hypothetical scenario that we described in last month’s report, i.e., an environment where the narrative of secular stagnation is challenged and investor expectations for the neutral rate rise closer to trend rates of economic growth. This remains a risk to our overweight stance towards risky assets and is not our base case view. But it does highlight the importance of monitoring long-dated rate expectations over the coming year, and argues, on a risk-adjusted basis, for a below-neutral duration stance within a fixed-income portfolio. Jonathan LaBerge, CFA Vice President The Bank Credit Analyst III. Indicators And Reference Charts BCA’s equity indicators highlight that the “easy” money from expectations of an eventual end to the pandemic have already been made. Our technical, valuation, and sentiment indicators are very extended, highlighting that investors should expect positive but more modest returns from stocks over the coming 6-12 months. Our monetary indicator has aggressively retreated from its high last year, reflecting a meaningful recovery in government bond yields. The indicator remains above the boom/bust line, however, highlighting that monetary policy remains supportive for risky asset prices. Forward equity earnings already price in a complete earnings recovery, but for now there is no meaningful sign of waning forward earnings momentum. Net revisions remain positive, and positive earnings surprises have risen to their strongest levels on record. Within a global equity portfolio, EM stocks have dragged down global ex-US performance, likely in response to deteriorating leading indicators for the Chinese economy. This implies that they are not likely to lead global ex-US equity performance higher over the course of the year barring an imminent shift in Chinese policy. We continue to expect that euro area stocks will have to do the heavy lifting, driven either by the underperformance of global technology stocks or the outperformance of euro area financials – which are extremely cheap relative to US banks and have much further scope for earnings to normalize as the pandemic draws to a close. The US 10-Year Treasury yield has edged lower over the past month, after having risen to levels that were extremely technically stretched. Despite this pause, our valuation index highlights that bonds are still expensive, and that yields could move higher over the cyclical investment horizon. We expect the rise to be more modest than our valuation index would imply, but we would still recommend a modestly short duration stance within a fixed-income portfolio. Commodity prices, particularly copper, lumber, and agricultural commodities, are screaming higher. This reflects bullish cyclical conditions, but also pandemic-induced supply shortages that are likely to wane later this year. Commodity prices are technically extended and sentiment is extremely bullish for most commodities, suggesting that a breather in commodity prices is likely at some point over the coming several months. US and global LEIs remain in a solid uptrend, and global manufacturing PMIs are strong. Our global LEI diffusion index has declined significantly, but this likely reflects the outsized impact of a few emerging market countries (whose vaccination progress is lagging). Strong leading and coincident indicators underscore that the global demand for goods is robust, and that output is below pre-pandemic levels in most economies because of very weak services spending. The latter will recover significantly later this year, as social distancing and other pandemic control measures disappear. EQUITIES: Chart III-1US Equity Indicators Chart III-2Willingness To Pay For Risk Chart III-3US Equity Sentiment Indicators   Chart III-4Revealed Preference Indicator Chart III-5US Stock Market Valuation Chart III-6US Earnings Chart III-7Global Stock Market And Earnings: Relative Performance Chart III-8Global Stock Market And Earnings: Relative Performance   FIXED INCOME:   Chart III-9US Treasurys And Valuations Chart III-10Yield Curve Slopes Chart III-11Selected US Bond Yields Chart III-1210-Year Treasury Yield ComponentsChart III-13US Corporate Bonds And Health Monitor Chart III-14Global Bonds: Developed Markets Chart III-15Global Bonds: Emerging Markets   CURRENCIES: Chart III-16US Dollar And PPP Chart III-17US Dollar And Indicator Chart III-18US Dollar Fundamentals Chart III-19Japanese Yen Technicals Chart III-20Euro Technicals Chart III-21Euro/Yen Technicals Chart III-22Euro/Pound Technicals   COMMODITIES: Chart III-23Broad Commodity Indicators Chart III-24Commodity Prices Chart III-25Commodity Prices Chart III-26Commodity Sentiment Chart III-27Speculative Positioning   ECONOMY: Chart III-28US And Global Macro Backdrop Chart III-29US Macro Snapshot Chart III-30US Growth Outlook Chart III-31US Cyclical Spending Chart III-32US Labor Market Chart III-33US Consumption Chart III-34US Housing Chart III-35US Debt And Deleveraging   Chart III-36US Financial Conditions Chart III-37Global Economic Snapshot: Europe Chart III-38Global Economic Snapshot: China   Jonathan LaBerge, CFA Vice President The Bank Credit Analyst Footnotes 1 Please see Global Investment Strategy "Taxing Woke Capital," dated April 16, 2021, available at gis.bcaresearch.com 2 Please see The Bank Credit Analyst Special Report "R-star, And The Structural Risk To Stocks," dated March 31, 2021, available at bca.bcaresearch.com 3 Please see The Bank Credit Analyst Special Report "R-star, And The Structural Risk To Stocks," dated March 31, 2021, available at bca.bcaresearch.com 4 Presented in this fashion, a budget deficit (surplus) is recorded with a positive (negative) sign. 5 For more information, please see US Political Strategy report “Biden’s Pittsburgh Speech And Legislative Agenda,” dated April 1, 2021, available at usp.bcaresearch.com 6 Please see “Term premia: models and some stylised facts”, by Cohen, Hördahl, and Xia, BIS Quarterly Review, September 2008.