European Long Short macro and market update
16 December 2019
Quantitative analysis: Macro Matrix – tactical credit and economic indicators
Source: Martin Currie. Six month data as at 13 December 2019.
- UK politics in now a non-issue. The clarity (and probably speed) of Brexit negotiations will improve.
- But until Brexit is finally sorted with a new trading agreement, a risk discount to UK assets will continue to exist, but it will be squeezed.
- The UK is first among European governments to commit to an aggressive fiscal, reflationary policy: significant spending in NHS, infrastructure, housing as well as tax cuts – other governments may follow suit.
Qualitative analysis: Market Traffic Lights – providing a strategic view
Source: Martin Currie. Six month data as at 30 November 2019.
- Monetary policy will stay accommodative; possible next move is a rate cut. Stronger pound will lead to lower inflation numbers at least in 2020.
- Obvious winners from this are the housebuilders and its supply chain. We are well positioned in this area.
- Political stability and a Brexit deal will be materially impactful on corporate investment. Overall, it could produce a boost to GDP of 2-3% over the next two years.
- Economic factors are now at 50% in the three-month indicator. We have not been at this point for a long time.
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