The return of the US inflation threat

BNP Paribas
Door juni 28, 2018 11:02

The return of the US inflation threat

Asset Allocation Monthly

  • As in February, US Treasury yields rose to the point where they ended up rocking markets, but this time the disruption was more visible in the US dollar and emerging markets than in equity markets.
  • We see several factors for the rise: (i) US inflation and crude oil prices hit 2018 highs in April, (ii) US macroeconomic data have been robust enough for the US Federal Reserve to continue normalising its interest-rate policy, and (iii) rates markets have become more concerned about US Treasury debt issuance.
  • The bar is quite high for further interest-rate increases in the near term, but when policy tightening does resume, we think this will not keep equity markets from rallying as long as the growth backdrop remains solid.
  • The stronger USD reflects disappointing economic activity data in the G10 and emerging markets compared to the US. This is consistent with markets pricing in reduced expectations of central bank policy normalisation in Europe and Japan.
  • Further USD strength is possible, but we doubt it can persist in the medium term unless the prospects for growth in the US continue to decouple from those for the rest of the world.​
BNP Paribas
Door juni 28, 2018 11:02

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Twitter

Currencies: Us Dollar Bar For Us Fx Intervention Remains High -> https://t.co/2ny01nTS55 #currency #China #tradewar via @PictetWM @PictetAM_NL

Long-term Equity Investments under Solvency II -> https://t.co/MDJWukfKfB #solvency2 #equity #europeancommission via @DWS_Group

Blitzscale and Hope: Unicorns, IPOs and the Fear of Repeating the Late 1990s -> https://t.co/N6TXHvJWCS #unicorns #IPO via @epochinvest

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