One Pager
Macroeconomic One Pager
An environment featuring higher-for-longer global interest rates is particularly inhospitable to alternative assets. Their net present value is lower because of a higher discount factor, this being precisely the negative wealth effect that is one of the results of a tighter monetary policy, which aims at slowing the domestic absorption of goods and services to bring inflation down.
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Macroeconomic One Pager
The countdown to the beginning of the cycle of monetary easing in advanced economies, starting with the U.S., continues. Downbeat economic data or signs of lower consumer inflation improve market sentiment and investors place bets on more ambitious rate cuts happening earlier in the year, whereas reports in the opposite direction undermine asset prices. In the meantime, intriguing phenomena are occurring. For instance, the S&P 500 stock market index has returned a handsome 28% 12 months through February 29th but there is a twist. In the same period the return of a subindex comprising of the 10 largest listed companies, a sample heavily biased towards Information Technology (IT), was a jaw-dropping 60%. Therefore, everything else reduced overall performance by 32 percentage points.1
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Macroeconomic One Pager
The latest annual edition of the Armed Conflict Survey is out. According to the International Institute for Strategic Studies (IISS), the organization that prints this authoritative reference, the number of fatalities and incidents increased by 14% and 28%, respectively, over a year ago.1 In absolute numbers, there were 183 conflicts, the highest tally in three decades. But there is more.
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Macroeconomic One Pager
Such are the times: until a couple of months ago “higher for longer” was the law of the land in discussions about interest rates in advanced economies and their impact on world portfolio returns; “higher for longer is dead” is the new consensus now. A few weeks with benign inflation data, coupled with leading indicators pointing to tepid economic activity in the U.S. and, of course, the chair of the Federal Reserve (Fed) stating that the possibility of rate cuts was coming into view radically changed the environment.
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