Rebuilding confidence

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Rebuilding confidence. Han de Jong Group Economics March 2012. Six months ago: pessimism. Contagion in euro crisis Sharp drop in economic activity & business confidence Fear for another sharp downturn like Lehman. Why did the global economy not collapse?. - PowerPoint PPT Presentation


  • Rebuilding confidenceHan de JongGroup EconomicsMarch 2012

  • *Six months ago: pessimismContagion in euro crisis

    Sharp drop in economic activity & business confidence

    Fear for another sharp downturn like Lehman

  • *Why did the global economy not collapse?Financial system did not dry up

    European leaders took positive steps

  • **Business confidence: PMI and ISMindexSource: Bloomberg

  • **Business confidence: PMISource : BloombergIndex

  • **Divergence US and eurozoneUnemployment, %Source: Bloomberg

  • *Money growth% yoySource: Bloomberg

  • **Divergence Europe: car sales

    Portugal-48.8Greece-45.2Ireland -8.6France-20.2Italy-18.9Netherlands-10.0UK-2.5Germany 0.0Estonia+29.7Iceland+148.5% yoy, February 2012Source: Bloomberg

  • **US: self sustaining growth

  • *China hard landing or soft landing: Car salesmillionsSource: Bloomberg

  • **Economic situationUS moving to self-reinforcing recovery

    Europe improving gradually

    Emerging economies taking advantage of industrial recovery and room to stimulate

  • **Euro crisisLTROs have eased pressure

    Greek tragedy no longer problem for financial markets now purely political

    New Compact

    Likely increase bail-out funds

    Calm has returned to markets

  • **2yr government bond yieldsSource: Bloomberg%

  • **European banks tightening lending criteria until Q4Net-tightening (%)Source: Thomson Reuters Datastream

  • *Risks to the ECBs approachECB balance sheet riskier


    Phenomenal distortion in markets, will lead to misallocation

    Reduced urgency other policymakers- Public finances- Structural reform

  • **Structural improvements?Deleverging continues

    Eurozone public finances much improved

    Structural reform

  • *Spain

  • *Italy

  • *UnemploymentSource: Bloomberg

  • **US: Debt deleveraging householdsSource: Thomson Reuters Datastream% GDP

  • *RisksEscalation euro crisis - Austerity fatigue- Loss of patience

    Oil prices

    Rising interest rates

    China hard landing

    Too much austerity

    Too little austerity

  • *Price earning ratio S&P 500 Source: Bloomberg

  • ***Investment portfolios adding riskEquities: raised to neutral

    Equities: - more cyclical exposure- overweight Emerging Markets

    Bond:High yields, corporates, Emerging Markets

  • **Equities

  • **Bonds%









    Government bonds30

    Corporate bonds30

    High yield (funds)10

    Inflation-linked bonds10

    Covered bonds10

    EM bonds (funds)10



    Geografische allocatie onveranderd

    EM Latin AmericaOverwogen

    EM Asia PacificOverwogen

    North AmericaNeutraal

    Developed markets Asia (ex-Japan)Neutraal


    EM Europe, Middle East, AfricaOnderwogen


    Sector allocatie is aangepast

    Consumer staplesOverwogen



    Basic MaterialsNeutraal



    Consumer discretionaryNeutraal


    Telecom servicesOnderwogen


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