Inflation Risks, Policy Lags, May underpin new gold bull market

Blue Quadrant Research Team
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Market Insights

Synopsis

Current consensus expects continued disinflation in the global economy. US and global labour market dynamics do, however, point to a threat of the return of sustained wage inflation over the next 5 to 10 years. A heightened risk to medium-term inflation outlook is caused by:
  1. Fundamental dynamics such as lack of infrastructure investment in major developed economies.
  2. The end of ‘Moore’s’ law and geopolitical-induced disruption to global energy supplies.Memories of the 2008 financial crisis create the risk that policymakers will be slow to react and respond to a return to elevated global inflation.
Memories of the 2008 financial crisis create the risk that policymakers will be slow to react and respond to a return to elevated global inflation.  

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US Dollar Dynamics Positive

Blue Quadrant Research Team
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Market Insights

Synopsis

US current account deficit will narrow and possibly move to surplus as US energy production and net imports decrease. Accelerating US economic growth will lead to gradual rate normalization. Coupled with less global dollar liquidity and a smaller US current account deficit, the fundamental underpin for the global ‘carry’ yield trade will become progressively less favourable. These dynamics will attract capital flows back to the US, supporting sustained US Dollar bull market.  

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US Housing Market Outlook 2014

Blue Quadrant Research Team
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Market Insights

Synopsis

Recent data covering the US housing sector has shown a mixed picture, with some indicating renewed weakness in new home sales and existing home sales. In this insight, we examine what is driving some of this renewed softness and detail our longer-term outlook for this key sector of the US economy.  

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US income growth 2014

Blue Quadrant Research Team
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Market Insights

Synopsis

A key driver of any sustained recovery in GDP growth in the US must be underpinned by consumption growth. Consumption growth itself needs, however, to be supported by real growth in disposable incomes. Although the rate of real disposable income remains positive, it is below the median levels consistent with GDP growth above 3%. A further slowing in wage and income growth would present a downside risk to our current forecasts.  

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