Can markets withstand the removal of QE? Who has convincing solutions to Germany's problems? Bundestag elections more. Cash, freedom and crime more. The US dollar easily defended its position as the dominant currency in the international monetary system. But both the euro and the dollar gradually gave some way to other reserve currencies. Robo-advice - a true innovation in asset management. Robo-advisors are online investment platforms that use computer algorithms to manage client portfolios and are thus part of the FinTech universe.
With their user-friendly, automated and low-cost services, robo-advisors pose a challenge to traditional financial advisory services and are growing fast. Online client onboarding is the most crucial step in this process, relying on questionnaires to figure out clients' preferences. Following a conservative approach in their asset selection, robo-advisors mainly invest in ETFs.
Portfolio allocation is done via mean-variance optimisation and threshold-based rebalancing is utilised to maintain targeted asset weights. Wealthier and more educated clients are joining millennials as robo-advisory clients.
Robo-advisors can contribute to financial inclusion, while their long-term success relies on a high degree of accuracy and suitability for clients. Cash, freedom and crime. With the growing use of digital payments, the need for physical cash is no longer self-evident.
Demand for euro cash is on the rise. Euro cash in circulation tripled between and to EUR 1. It is estimated that euro cash is used for domestic payments, hoarded for saving purposes and held outside the euro area at roughly equal parts. New CO2 emission standards for passenger cars: Will car buyers play to the tune? These targets cannot be achieved with combustion engines alone.
Stricter regulation thus enforces the electrification of the power train. However, the average car buyer currently does not play to the tune of regulatory policy and turns a cold shoulder on most alternative fuels. Regional autonomy movements in Europe - also about finances. Beyond the Catalan referendum, independence movements in Europe seem to enjoy a revival. Unsurprisingly, most of the regions with strong separatist tendencies are amongst the wealthiest in their respective countries.
Germany's political impasse spoils EMU reform timeline. This will in return dampen optimism that a French-German tandem will provide a fresh impetus to the EU as a whole before the European Parliament elections in Germany - Capex cycle unfazed by political uncertainty.
We have lifted our GDP forecasts for and about half a point to 2. German stock market rises to record highs: All is well - or is it? On November 3, the Dax reached a new record high, at 13, It has more than doubled since However, the commonly used total return index is unsuited for international comparisons. In addition, the Dax which is dominated by manufacturing firms is not representative of the German economy as a whole, which relies much more on the services sector.
Despite the recent gains, the German stock market remains underdeveloped. This is not least due to a pension system which hardly involves the capital market, to risk-averse retail investors and to a large share of family-owned companies. Ambitious climate goals are moving out of reach. Between and , Germany reduced its greenhouse gas emissions GHG emissions by This is a considerable success, particularly in an international comparison.
Germany remains an anchor of steadiness with an undisputed role as leader in Europe and is the only country that comes close to being on a par with America.
This story of success is based on many structural factors, some of which complement and mutually reinforce each other. We group them as follows: German politicians are therefore confronted with the increasing challenge of holding the eurozone together. The dark sides of QE: Backdoor socialisation, expropriated savers and asset bubbles. While European central bankers commend themselves for the scale and originality of monetary policy since , this self-praise is increasingly unwarranted.
While the positive case for European Central Bank intervention is weak at best, the negative repercussions are becoming overwhelming. This paper outlines the five darker sides to current monetary policy. What this victory for the Leave campaign ends up meaning for the future of Britain is debatable. What is not in doubt is that Europe without its brightest star will be a darker place.
Adding to the gloom is the fact this was avoidable. Britain voting to go it alone mirrors a wider distrust in the European project — a manifestation of its weak economic situation.
Unlike the last few years, this summer was relatively quiet. Investors have so far not priced in this outlook. Since the prospects for growth across all the major countries is better than it has been for some time it remains a puzzle why there hasn't been a greater sell-off in bond markets.
Taking a step back. As markets enter into the summer lull, it is useful to take a step back. The global economy is in better shape than it has been in several years.
This has allowed other central banks to follow the Fed and gradually start their exit journey, a process that is a historic challenge given the unprecedented level of monetary accommodation. But with inflation still below target, a key part of the normalisation puzzle is still missing. Core inflation should move higher over the medium-term in the US and Europe, supporting further monetary tightening and a normalisation of yield curves.
While no policy change is expected by the Fed on July, an announcement to begin phasing out its balance sheet reinvestment is likely in September and we expect another rate hike in December. As for the ECB, rate hikes are still far off, and we expect the central bank to announce another QE extension and tapering in October.
We expect growth to rebound from the slowest pace post-crisis in , though relative to consensus we are more positive on the US and more bearish on Japan.
In China, we continue to expect a gradual deceleration, but see upside risks to growth in the second half of the year. There are signs the dollar has peaked, but we do not expect a material devaluation yet. We are more positive on the euro, seeing upside versus the dollar and sterling. We expect yield curves to normalise gradually, but there is risk of a more sudden upward shift, depending on the path of core inflation.
Global investors have recently been forced to sift through mixed signals from macro data and markets. Chief among these discordant messages is the apparent dichotomy between softer inflation, lower yields and flatter curves, and falling oil prices on the one hand, and still solid global growth and firm risk sentiment on the other hand. Supply-side factors, rather than a weaker demand outlook, underpin the fall in oil prices, and this is positive for growth for oil importers.
The softening core inflation trend is due primarily to temporary factors, particularly in the US, and the uptrend should resume given the solid growth momentum. Indeed, our global growth outlook is little changed since the start of the year. This downgrade is compensated by upgrades to eurozone and China growth. In FX we have turned more positive on the euro but stay bearish sterling. Moreover, the intervention to resolve ailing banks in Veneto is positive and lowers risk in Italy.
The exception, as expected, is the UK, where the outcome of Brexit has become more binary: This issue is published as the Federal Reserve starts rolling back quantitative easing, symbolising the post-crisis era giving way to the post-QE world. After all, central bank balance sheets and asset prices have climbed hand-in-hand since the crisis. Does the planned descent of the former necessarily lead to the latter following suit?
All three features in this Konzept are devoted to testing this hypothesis. DeCAF — how to invest in a post-carbon world. Decarbonisation initiatives to halve global emissions will dictate how much certain industries can produce over the coming decades. The case against US infrastrucutre mega-spending.
There is consensus among economists, politicians and commentators that America needs a massive infrastructure investment programme — even the two presidential candidates agree.More...