In today’s briefing:
- The Market’s Triumph over the Fed: Winning by Losing!
- CX Daily: Giving China’s Death Row Inmates a Second Chance
- The Long Term Debt Cycle
- ESG Risk: A Key Factor in Enterprise Risk Management
- Cre Watch: Illiquid Trouble Stuck on the Books
- UK: Lying Flat Again in 2023
- Asian Frontier Markets Not Impacted by U.S. And Europe Banking Sector Stress
The Market’s Triumph over the Fed: Winning by Losing!
- The 3-month annualized change of all six CPI measures in our US Inflation Monitor fell compared to February.
- Given the levels of inflation and its poor track record, the Fed will want to put one extra hike in to be ‘better safe than sorry.’
- The odds markets will win this battle with Powell are increasing, but only because so is the likelihood of a recession.
CX Daily: Giving China’s Death Row Inmates a Second Chance
- Legal /In Depth: Giving China’s death row inmates a second chance
- China-New Zealand /: China-New Zealand ties will continue to ‘grow and mature,’ island nation’s top diplomat says
- Stocks /: China’s newest stock exchange fails to recapture early momentum
The Long Term Debt Cycle
- Long-term, structural economic growth is mostly driven by two factors: demographics and productivity.
- Both peaked in the late 80s, and we chose to fix the problem with a ton of debt.
It worked until now, but we are at very late stages of the long-term debt cycle. - Healthy demographics and high fertility rates facilitate a growing labor force: retirees are more than offset by new young workers, and hence the share of working-age population as % of total increases.
ESG Risk: A Key Factor in Enterprise Risk Management
- Environmental, social, and governance (ESG) risks, also known as sustainability risks, can significantly impact an organization’s reputation, operations, and financial performance.
- Assessing sustainability risk involves using methods such as ESG ratings, data analysis, and scenario planning, and considering both qualitative and quantitative factors.
- To effectively manage sustainability risks, we must incorporate them into the overall ERM framework, with a clear understanding of their potential financial implications and alignment with organizational goals and objectives.
Cre Watch: Illiquid Trouble Stuck on the Books
- Across the US, commercial real estate (CRE) has sharply reversed the covid boom.
- We see more and more firms letting their leases expire to mitigate costs – an exercise which naturally will worsen the figures further.
- Now, with CRE constituting upwards of 35% of small banks’ total assets, further pressure on balance sheets and credit ought to impact the broader economy as well.
UK: Lying Flat Again in 2023
- UK GDP was flat in Feb-23 as strikes offset the boost from warm weather, which was especially pronounced in construction.
- Upwards revisions since Oct-22 support Q1, lifting our forecast by a tenth further above the consensus to GDP growth of 0.1% q-o-q.
- The UK may resist recession by lying flat. Potential growth could eventually catch supply up with demand, albeit with more excess inflation and policy rate persistence.
Asian Frontier Markets Not Impacted by U.S. And Europe Banking Sector Stress
- Despite the immense volatility faced by banking systems in the U.S. and Europe, Asian frontier markets were relatively unscathed, with the AFC Asia Frontier Fund, AFC Iraq Fund, and AFC Vietnam Fund reporting positive returns for March.
- This month’s performance continues to reflect the significant diversification benefits that Asian frontier markets offer investors during times of unsettling global events.
- Furthermore, the banks in Asian frontier countries are not directly impacted by the banking sector stress which the U.S. and Europe faced in March since the banks in our universe predominantly focus on their domestic economies and run balance sheets geared towards traditional deposit and lending products.
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