Economic Growth

Momentum, high cash balances, FOMO, and expectations of soft landing drive the market higher. This rally may continue for a while, but macroeconomic headwinds are intensifying and will eventually derail the rally. It is too early to celebrate victory.

Talks of a détente are premature and there is no domestic political basis in China or the US to support a true détente. Investors should not underappreciate global risk, on the basis of a détente, and should avoid Greater China equities in the next 18 months.

Assuming yesterday’s policy rate hike is a sign that Turkey is finally veering towards orthodox economic policies; should investors rush in?

China is facing a risk of deflation. Marginal interest rate cuts and targeted stimulus will be insufficient to boost China’s growth given the current deflationary mindset and the danger is that the economy may be entering a liquidity trap. Deflation is bullish for government bonds, but negative for equity prices. Chinese share prices will continue to decline.

As the S&P 500 nears our 4,500 target, we review the rationale behind the call to assess its merit.

The Eurozone just experienced two consecutive quarters of GDP contraction. For the remainder of the year, can growth pick up or will the ECB decimate activity?