Global Outlook report sees lower inflation and easier monetary policy providing further support to financial asset prices
“The plunge in oil prices reduced inflation even further and encouraged additional monetary easing,” said Larry Kantor, Head of Research. “This pushed bond yields even lower and boosted economic growth, which in turn should provide continued support to stocks and corporate bonds.”
The surge in the US dollar has been largely constructive for the global economy, as it redistributes growth and inflation from the US – where excess capacity has shrunk and monetary policy is set to tighten – to the euro area and Japan, where there is still ample excess capacity and deflation is a greater threat. Lower inflation and a stronger US dollar also means the US Federal Reserve can now be more cautious about raising rates than it otherwise would have been, allowing markets to continue to perform well.
Among developed economies, the euro area and Japan should be clear beneficiaries, gaining from lower oil prices, weaker currencies and extreme monetary support. Partly as a result, we believe that stocks in those countries will continue to outperform. Emerging Asia has also benefited from recent market changes, central bank interest rate cuts, and still-strong global technology demand.
However, not all countries and regions are beneficiaries. China has resisted currency depreciation and continued to rein in credit expansion and excessive investment, placing downward pressure on its economy. Latin America, where many countries export commodities, has suffered from the weakness in commodity prices as well as capital outflows due to the strength in the US dollar and the anticipation of US Federal Reserve rate hikes.
Other recommendations in the Global Outlook include:
Barclays’ Global Outlook research report, published quarterly, provides an assessment of all major economies and outlines the likely implications for global financial markets.
Single Stock Indices add to the existing range of jointly-developed indices based on the Cyclically Adjusted Price Earnings® (CAPE®) rati...View article
Barclays Capital Inc. announced today the release in the US of a newly enhanced version of Hydra®, its liquidity seeking algorithm for equities. T...View article
Unreasonable Impact supports entrepreneurs who are collectively generating thousands of jobs on the frontier of the green economy This November, 13 ve...View article