Policy

This week’s Special report revisits our TIPS Golden Rule. We provide a 12-month inflation forecast and discuss how it impacts our TIPS view.

The latest ‘nowcast’ for world economic growth in the fourth quarter has plunged to just 1.2 percent, marking the cusp of another world recession. One important implication is that expectations for oil demand growth and industrial metal demand growth are way too optimistic.

Many commentators have attributed the latest increase in Chinese interest rates to an improving economy, the large issuance of government bonds, the tax payments season, and other technical factors. Yet, these explanations are missing the key point: the PBoC has steered interbank rates higher to defend the currency. Higher borrowing costs are the last thing the mainland economy now needs.

Our thoughts on this morning’s CPI print and the bond market’s reaction.

Amid a range of geopolitical narratives, what matters is that the US strategy of economic engagement with its rivals is failing, giving rise to a new strategy of containment that will reinforce the secular rise in geopolitical risk. Our market-based quantitative indicators of geopolitical risk are set to rise in the coming year.

In this Insight, we review the performance and rationale for our current set of tactical fixed income trade recommendations. Our highest conviction positions also happen to be our most successful trades: positioning for a narrowing of the German bund-JGB spread and wider Japanese inflation breakevens.

The Netherlands has a healthier and more stable economy and demography than its European peers. Investors should stay overweight developed European equities, including Dutch equities, relative to emerging European equities.