Regional Specialists Review August 2014
Geo-political events have shadowed economic and financial markets in recent months. Between Israel-Gaza, Ukraine-Russia, Iraq-Kurds-“Islamic State” Sunni extremists, and continued turmoil in Libya, there’s so much to consider. That said (and as has most often happened), the markets were only moderately impacted by these exogenous factors, as most were judged to be either temporary or of limited global scope.
The U.S. economy appears to be in a convincing bounce-back from a harsh winter, and increasingly the consensus sees growth gaining more traction – possibly impacting inflation down the road. The U.K. remains on a tear. Continental Europe has slowed, impacted by sanctions on, and by, Russia and other factors. Japan’s growth collapsed in the second quarter as expected, after a tax increase that offset previously strong demand. Economic events in Emerging Markets remain unclear, although their financial markets have been strong indeed.
To the casual observer, it’s a cacophony of noise and it’s hard to discern any recognizable note. If you would like to focus on a single tune that might provide guidance, we would recommend monetary policy. Although somewhat softer than before, its decibels continue to scream “stimulus”.