Our Views on the Markets and the Economy

What were you doing on the eve of the pandemic? That may be easy to recall. But what were you doing in early 2014? That may take a bit more time to work out. Why do I ask?



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An analysis of UK interest rates

What lies ahead for UK interest rates? In the wake of its recent quarterly Monetary Policy Report, the signals from the Bank of England (BOE) were far from clear. This was highlighted by the immediate media reaction ranging from talk of negative rates to a focus on higher rates. Let’s put all this in context.



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A General Overview of the Economic Picture

The start of the year has highlighted the complex interaction of factors impacting the financial market outlook, in the UK and globally. 



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At the beginning of each year The Financial Times conducts a survey among UK based economists. One of the main stories in today’s FT is about this survey, “UK economy set to become one of the last to recover from pandemic” and, online, the paper also has a link to all the replies.



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What lies ahead for the UK economy in 2021? A year ago, it was remarkable how often the forecasts for 2020 contained puns about perfect 2020 vision. We avoided them, and just as well. In the event few, if any, saw what lay ahead.  It was a year when a downside tail-risk dominated as the pandemic hit. This triggered dramatic movements in financial markets and huge proactive policy stimulus measures, particularly across the so-called advanced economies.



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Grass roots, green and geopolitics are the areas where I envisage change as a result of the pandemic. All will be positive for tackling climate change and should be good news for the UK and the City.



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“A billion here, a billion there, and pretty soon you’re talking real money.” These words, attributed to former US Senator Everett McKinley Dirksen, seem appropriate now as across the world public debt has reached an all-time high.



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The US election and policy implications

How should we view the implications of the US election? Financial markets have reacted positively to the election result, with equities strengthening globally, while bond yields remain low. This is despite two unfinished aspects of the election that the markets will need to keep focused upon: the contesting of the election result by President Trump; and control of the Senate to be determined by two run-off elections in Georgia in January.



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The UK, like the rest of the world, continues to face a global health crisis that has triggered a global economic crisis. It is only once the health crisis is over that we can address fully the economic crisis. Currently we are in a vaccine gap phase. This is contributing to a diverging performance globally, both in health and in economic terms.



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One hallmark of the UK economy has been its ability to cope with shocks. This is seen in its flexible jobs market.



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