Current Perspectives

 

Minimum Wage Hikes: Fast Food for Thought

The minimum wage is rising across the US, and fast-food companies are feeling the pinch. In our view, watching how companies cope reinforces the importance of a selective approach to stockpicking.

Is Sovereign Debt Sacrosanct?

Many governments face large and seemingly insurmountable levels of debt. Headline mainstays Greece, Ukraine and Puerto Rico have recently been the subjects of debate over the necessity or suitability of receiving debt relief. Other governments may soon find themselves under the same spotlight.

Economic Perspectives

 

US Economic Growth and Implications for Monetary Policy

US :: Despite the modest second quarter rebound, the economy’s growth rate has been generally sluggish over the past five years. This may suggest lower potential growth going forward—and less resource slack for the economy to grow without triggering a rebound in

Indonesia’s Fiscal Performance set To Improve

Asia :: Indonesia’s decision to scrap domestic fuel subsidies and use the savings for needy infrastructure projects marks a big step forward for the country’s fiscal health. It not only lessens the burden of doling out subsidies, but represents a better allocation of resources, which should help to strengthen the economy.

Brazil: Reassessing Fiscal Projections

Latin America :: The Brazilian government has announced a deeper-than-expected cut to its primary fiscal surplus target for this year and next. This reduction has economic and political implications, and could result in sovereign-credit-rating downgrades even sooner than we initially expected.

BOJ’s New Inflation Measure Reveals More Than Just Numbers

Japan :: The Bank of Japan’s (BOJ’s) new core inflation measure has generated some cynicism in the market, as it indicates that inflation may be closer to the BOJ’s target than other measures suggest. We think this distrust is misplaced. To us, the new measure emphasizes the BOJ’s eclectic approach to judging the inflation pulse, indicating that a tapering, not a further easing, will be the BOJ’s next move.

Europe’s Consumer-led Recovery Not Just About the Oil Price

Europe :: Consumer spending in the euro area is now growing at its fastest since 2007. Lower oil prices have helped but are only part of the story, in our view. There’s also been a steady improvement in labor-income growth and consumers are finally willing to borrow again. Both factors should underpin consumption, and the recovery more generally, when the boost from lower oil prices starts to fade.

Global Economic Outlook July 2015

The global economy continues to expand at a moderate pace and our growth forecast of 2.7% for 2015 is unchanged from last month. A modest acceleration to 3.2% is expected for 2016.

In the News

 

Liquidity risk is manageable and can offer opportunities: AB

Liquidity risk—or the danger that investors will be unable to trade in securities at the time and price of their choosing—has become a much greater challenge for investors, and could hurt bond investors in particular as interest rates rise.