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March 2017
Brian Redican
Risks and Opportunities in 2017
Economic and Financial
Outlook
Unclassified / 2 of 22Economic and Financial Outlook
Higher US interest rates would exert upward pressure on global rates
Is the 35-year secular decline in rates over?
Unclassified / 3 of 22Economic and Financial Outlook
Fewer young people vs more old people
Demographics and saving behaviour
Unclassified / 4 of 22Economic and Financial Outlook
Slower population growth and demand
Unclassified / 5 of 22Economic and Financial Outlook
Global bond yields have risen as has inflation…
Unclassified / 6 of 22Economic and Financial Outlook
When rates are flat, currencies are crucial
Unclassified / 7 of 22Economic and Financial Outlook
Looser Chinese policy boosted activity…
Unclassified / 8 of 22Economic and Financial Outlook
…boosting commodity prices and inflation
Unclassified / 9 of 22Economic and Financial Outlook
Higher oil prices have driven up inflation…
Unclassified / 10 of 22Economic and Financial Outlook
Global manufacturing growth has improved…
Unclassified / 11 of 22Economic and Financial Outlook
Firms rebuild inventories and fiscal drag ends
Unclassified / 12 of 22Economic and Financial Outlook
Tight US labour market but wages still weak
Unclassified / 13 of 22Economic and Financial Outlook
Markets are prepared for modest inflation
Unclassified / 14 of 22Economic and Financial Outlook
Two risks for the US economy…
Unclassified / 15 of 22Economic and Financial Outlook
Global manufacturing has improved…
Unclassified / 16 of 22Economic and Financial Outlook
Europe is yet to see inflation rise sustainably…
Unclassified / 17 of 22Economic and Financial Outlook
Political events loom large in Europe in 2017
15 March Netherlands General Election
March UK Article 50 Trigger
23 April French Presidential Election
7 May
2Q17/1Q18 Risk of Italian Election
24 September German Federal Election
Unclassified / 18 of 22Economic and Financial Outlook
5% chance that the Eurozone disintegrates?
Unclassified / 19 of 22Economic and Financial Outlook
Australian growth and inflation remain sombre
Unclassified / 20 of 22Economic and Financial Outlook
Weak wages growth ensures ‘real’ debt
burden will remain high
Little scope for further debt-fuelled
economic growth
Aussie households face high debt & weak wages
Unclassified / 21 of 22Economic and Financial Outlook
Still lots of work in NSW and VictoriaDetached house activity diverges
Housing construction is still boosting growth
Unclassified / 22 of 22Economic and Financial Outlook
But are we about to see much stronger growth?
Unclassified / 23 of 22Economic and Financial Outlook
US economic growth has been slowing
4.2
3.2
2.5
2.0
0
1
2
3
4
5
50's-60's 70's-80's 90's-00's 2010+
US Average Growth% y/y
Unclassified / 24 of 22Economic and Financial Outlook
Source: PIMCO
Reviving ‘animal spirits’ or destroying global trade?
The Trump Effect
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