Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Magnoli Bocchi’

The Year Ahead: Where to Invest in 2017

Posted by hkarner - 16. Januar 2017

By on January 3, 2017  RGE EconoMonitor

The Year Ahead: Where to Invest in 2017

 Key takeaway – Across the globe, populism and protectionism are on the rise and macro fundamentals remain weak. In this challenging context, growth will remain subdued in 2017, hampered by sluggish investment and productivity, ever-accumulating savings and modest inflation. With the exception of the Unites States (US), developed markets (DMs) will stagnate, burdened by debt and structural rigidities. In the US, if Trump’s policies veer toward pragmatism, the economy will grow above trend, lifting financial markets, especially in the first part of the year. Emerging markets (EMs) will face low growth and risks of political volatility. At the global level, geopolitical tensions, financial instability and competitive devaluations remain key risks. Fiscal and monetary policies are unlikely to strengthen demand and investment; fiscal policy might turn expansionary only in the US. Monetary policies, unable to spur growth, will steadily diverge – with a mild tightening cycle in the US and easing in the Eurozone (EZ) and Japan. While traditional banks remain under pressure, asymmetric economic performance and diverging monetary policies will increase the risk of market dislocations. Unusual times call for unusual portfolios: investors should lower their return expectations, and increase exposure to alternatives. Den Rest des Beitrags lesen »

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Italy: Willingness to Reform Is the Issue, Not the Referendum

Posted by hkarner - 3. Dezember 2016

By on December 1, 2016  RGE EconoMonitor

Italy: Willingness to Reform Is the Issue, Not the Referendum

 Key takeaway – Italy’s prospects are lacklustre, growth is stagnant. Focused on privilege preservation, the political system fosters anti-establishment feelings. Reforms are needed but – due to a reluctant electorate and a cumbersome legislative process – are difficult to implement. Cognizant of the country’s challenges, over the past three years Renzi’s government announced many important reforms, but implemented few. According to Renzi, the ineffectiveness of the legislative process is the culprit; hence, tackling institutional paralysis is the key priority. On Sunday December 4, Italy will hold a constitutional referendum to streamline lawmaking. The ‘No’ camp, an heterogeneous coalition of political forces, questions both the substance and the process of the proposed reforms and is ahead in the opinion polls. The referendum is likely to be rejected by a narrow margin. Political, economic and market concerns of a ‘no’ vote are overblown. Yes, the political process would become more uncertain, the economy would keep stagnating and market volatility would temporarily rise. But in the short term nothing will change. To enhance the long term competitiveness of its economy, Italy needs a comprehensive modernization. In other words, passing laws is a necessary, but not sufficient condition. Government needs to show willingness to reform, and burn political capital in getting transformational laws through parliament.  

Growth is stagnant … The Italian economy is large and diversified[1]. Yet, growth is hampered by long-standing rigidities: a) demographics are unfavorable[2]; b) established power structures hinder meritocracy and risk taking; c) innovation is limited and total factor productivity (TFP) often negative[3]; d) labor laws are rigid and costly; e) wage growth is above productivity growth[4]; f) the public sector is inefficient, burdened by a sclerotic bureaucracy[5]; g) over-regulation, backdoor dealings, crony politics, corruption and organized crime hamper economic performance; h) the judicial system is slow[6]; i) at 132.7 percent of GDP, public debt is larger than ever[7], perhaps too big to rescue; l) taxes are high[8]. As a result, per capita GDP is stuck at the level of the late 1990s and growth is sluggish: over 2016-21, Italy’s economy is expected to grow at around 0.8-1 percent[9]. Den Rest des Beitrags lesen »

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Italy: Can Reforms Lift Growth Prospects?

Posted by hkarner - 3. Oktober 2016

By on September 30, 2016 RGE EconoMonitor

Key takeaway – The Italian economy is large, relatively diversified and sturdy. Historically, growth has been driven by external factors (e.g.: the “economic miracle” after World War II) or political efforts (e.g.: competitive devaluations and fiscal spending between the 1970s and the 1990s). For decades, innovation and international competitiveness lagged most peers. After joining the Euro, the Maastricht deficit-and-debt thresholds constrained public expenditures and – as a result – growth declined below the European Union (EU) average. In 2016, growth is stagnant and prospects are lacklustre: power structures hamper meritocracy and risk taking, the investment climate is challenging, taxes are high. A crisis is looming in the banking system. Unemployment is above pre-crisis levels, and poverty and inequality on the rise. Over the next few years, the economy will be exposed to adverse shocks. Going forward, global growth will remain at best sluggish, inflation low. To avoid two lost decades, Italy should not count on external growth-drivers (it would be equivalent to waiting for Godot) but should instead proactively build internal growth-drivers via structural reforms. Den Rest des Beitrags lesen »

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Global Outlook: The Next Five Years

Posted by hkarner - 14. August 2016

By on August 11, 2016  RGE EconoMonitor

Global Outlook: The Next Five Years

Global outlook: the next five years

Alessandro Magnoli Bocchi

Key takeaway – Over the next five years, mega-trends will not support an acceleration of global growth. Consumption, investment and productivity will remain sluggish, inflation low. Macro fundamentals are weak: high debt and unemployment will constrain performance. Developed markets (DMs) will stagnate and emerging markets (EMs) will struggle. Flat real incomes and rising inequality are major political risks. Instability, populism and authoritarianism will rise. Political tensions, financial instability, lower oil prices, deflation and competitive devaluations are major economic risks. Fiscal and monetary policy will not support demand and investment. The over-reliance on central banks (CBs) will continue, leading to further financial repression. Regulatory tightening will force traditional banks to choose between lower profitability and sanction risks. Liquidity-driven markets will fuel asset inflation and remain jittery. Inevitably, the rising disconnect between fundamentals and valuations will bring about a bear market, if not a crash1. Unusual times call for unusual portfolios: investors should lower their return expectations, and increase exposure to alternatives. Den Rest des Beitrags lesen »

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Where to Invest in 2016

Posted by hkarner - 14. Februar 2016

By on February 12, 2016  RGE EconoMonitor

Magnoli Bocchi CCCurrently he is Chief Economist, member of the Management Team and the Investment Committee at the Kuwait China Investment Company

Key takeaway – As predicted, the markets are down and a mild global recession is on its way. Monetary policy remains accommodative, but interest-rate divergence increases volatility. Investors face a difficult environment: most markets remain overvalued and risks are tilted to the downside. After years of complacency, financial stress is rising and market-liquidity is getting tighter. In this context, capital preservation via a defensive asset allocation is priority. Yet, unusual portfolios – less liquid and more volatile – are likely to perform better than conventional ones. 

As predicted, the markets are going through a correction. As forecasted in October[1] and November[2], asset prices are falling in both developed (DMs) and emerging markets (EMs). Market participants are worried about the health of the global economy and feel less protected by central bank (CB) policies. As the sharp correction enters bear-market territories[3], rising risk-aversion and higher volatility could broaden the contagion.

Are we in a bear market? A cyclical bear market is underway across most equity indices. The S&P Global 1200 index is down 17.9 percent from its May 2015 record-high and 10.2 percent since the beginning of the year[4]. DM bonds are sought after, yet again[5]. How long will this last? Since 2009, all corrections[6] have been followed by swift bull-market resumption. This time, asset prices seem to be correcting a long-standing misallocation of capital[7]; as they re-align to fundamentals, a quick bounce-back looks unlikely. Indeed, a bear market can be an opportunity for properly-equipped investors, but falling asset prices are likely to hurt (an already fragile) real economic activity. Den Rest des Beitrags lesen »

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Ten Questions for the Global Economy

Posted by hkarner - 28. November 2015

By on November 25, 2015  RGE EconoMonitor

Ten Questions for the Global Economy

 Key takeaway – The fundamental structure of the world economy is changing. While the contribution of services to global output is on the rise, investment and productivity remain stagnant, savings keep accumulating, and growth and inflation decline. Meanwhile, globalization has increased co-dependence: a rising number of countries can influence the world’s economic performance and its financial stability. Yet, the international monetary system is neither fostering an efficient allocation of global capital nor preventing currency volatility. As a result, the global economy is in the middle of a “lost decade”: emerging markets (EMs) struggle with slowing growth, a sizeable external debt, capital outflows and depreciating currencies. Europe’s economies suffer from stagnating growth, separatist politics, a heavy sovereign debt, unfavourable demographics, inflexible labor markets, a migrant crisis and religious divides. Until 2020, the price of oil will stay in the US Dollars (USD) 50-60 range. As the shortcut to recovery is an ‘unfair’ mix of orderly debt restructuring and mild inflation, monetary policy normalization will take longer than expected, buoying the financial markets. As a result, the financial system is reaching an unstable equilibrium. The global economy is weak, the markets are strong, but the trade-off between sustained growth and financial stability is likely to continue. While high volatility will favour traders, for fundamental investors returns are likely to be lower than in recent years.
  1. Is the fundamental structure of the world economy changing? Den Rest des Beitrags lesen »

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