European Union leaders have at long last reached some agreement on a blueprint to increase the firepower of the European Financial Stability Facility and recapitalize Europe's banks. Although details are still very sketchy, there are grounds for fearing this may only be one more stepping stone on the way to solving the crisis.
Unresolved fiscal issues in the United States and the European crisis continue to weigh on the capital markets. However, the author believes the United States should begin to regain economic traction in 2012 and that less developed markets will continue to exhibit relatively strong growth.
The ECB will eventually end up with a more open-ended commitment to buy peripheral European debt. However, it will probably take further turmoil to achieve this. Once the ECB acts as lender of last resort, its balance sheet expands and the quality of its balance sheet deteriorates, leading to a fall in the euro. The weaker euro, in turn, makes QE3 ...
The lack of details behind the European Union's debt plan leads one to wonder if the pendulum swung from "not as bad" to "not as good" as it seems as if execution risk remains high. Given that the risk on dealer balance sheets is now down to levels not seen since 2003, volatility is likely to persist as very little volume is required to move market...
European politicians have shown they willing to act aggressively and make tough decisions, being ready to act again if the current rescue package is not enough to curtail the European crisis. However, two key issues still need to be addressed: the lack of economic growth and the mutualization of debt. Time will tell if additional action is needed.
European leaders appear to have outperformed market expectations with their rescue package, but there is still much to do. For example, the adequacy of the bank recapitalizations will be scrutinized and investor sentiment toward Italy and Spain is critical. Governance and growth challenges remain, and longer-term economic growth must be invigorated...
Cyclical volatility appears to be a defining characteristic of contemporary financial markets. Researchers reflect on the past two decades to identify common factors behind financial crises and caution about where the next bubble might be forming. They also consider life after debt, the fate of the euro, the Asian factor, and what to do now.
Weighing the evidence most often cited by bullish investors, the authors find it to be predicated primarily on a thinly supported assumption that strong corporate earnings growth will continue. The bear's case, on the other hand, appears more solid as it focuses on weakness in the underlying drivers of corporate earnings growth as well as on long-t...
This latest quarterly issue of “ViewPoint” features an interview in which the bank’s chief investment officer discusses his outlook for the global economy and capital markets for 2012. He notes that the U.S. should exhibit positive growth, boosted by capital spending, and that a growing U.S. economy should keep the global economy ...
Upon reflection of many meetings and conversations with economists, investment managers, and officials in Asia, three broad investment themes came out loud and clear: global growth is likely to continue to be muted; this will create some challenges for emerging countries; and Asia will therefore have to consider trade-offs with respect to their eco...
The financial crisis that began almost five years ago is still with us, and we are still dominated by the events unfolding in Europe. What are some of the root causes of the crisis, and what is the future likely to hold? This white paper examines the evolution of the financial crisis and offers advice on how investors might best navigate the comple...
If the current growth trend in bank credit continues, a failure on the part of the FOMC to raise its federal funds rate target and shrink its balance sheet will sow the seeds of a rate of consumer inflation above the FOMC’s 2% annualized target in 2014 and 2015.
Fiscal imbalances, monetary imbalances, and trade imbalances are serious issues that will continue to impact the relative value of the U.S. dollar, and none of these situations is easily solved. The concerns they raise should be given deep consideration by dollar-based investors moving forward.
The economic outlook has become slightly more mixed, especially in regard to the manufacturing sector and consumer spending after adjustments for inflation. Driving these inflation statistics and market anxieties higher were oil prices, and with the average price of gasoline in the U.S. nearing $4 per gallon once again, real questions have emerged ...
The pace of U.S. job growth in the next few months will not only determine the outcome of the November presidential election but also whether there will be a sustainable economic recovery. If the sharp slowdown in job creation in March is a precursor for developments in subsequent months as we suspect, the mid-year slowdown witnessed in the past co...