Macro Economic Research
26
May
2016
Three Bears

The slowdown in US productivity, if sustained, has the potential to kill the Goldilocks environment of recent years. Either (i) inflation will rise (hurting bonds), (ii) profits will disappoint (hurting equities) or (iii) companies will cut...

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26
May
2016
A Japan-style taper tantrum


• The BoJ will likely run out of JGBs to buy before inflation takes off  
• Tapering would remove Kurodanomics from the yen’s valuation  
• The authorities may instead choose to go for broke by buying forei...

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25
May
2016
Australia – domestic factors take centre st...


• Soft labour market data confirm weak domestic momentum  
• Fading economic tailwinds justify the RBA’s vigilance  
• Competitiveness gains increasingly reliant on slowing wage growth  
Konst...

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24
May
2016
Euro area growth – now for the hard part


• EA wage growth is modest and higher oil prices are hurting disposable income  
• But sturdy employment gains should power private consumption  
• Slower productivity growth and a pullback in EA rebalancing are...

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Investment Strategy
25
May
2016
Dollar valuation: the other dimensions


• USD still screens rich on REER-based signals; EUR, JPY, GBP are cheap
• Signals from productivity and external balances confirm this assessment
• Only rate differentials may continue to provide short-term USD support
...

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18
May
2016
Time to capture the Brexit premium


• We believe Brexit most likely won’t happen; the true odds don’t favour it
• The Brexit risk premium has shrunk modestly but not totally disappeared
•  We suggest buying GBP against EUR tactically, though o...

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13
May
2016
Earnings yearnings


• The reporting season confirmed that all not is well with profits
• Earnings are falling in most markets and equities are not cheap
• But margins are holding up despite the drag of poor productivity
• The inflation out...

LSR Asset Allocation
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11
May
2016
The dollar and global asset allocation


• The dollar influences financial conditions and budget constraints
• Dollar strength depresses domestic profit margins and global trade growth
• Dollar weakness helps global yield seeking and value stocks
 

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