My Weekly Column – September the 7th

Several issues this week

The first point is the downward revision by the ECB of its GDP and inflation forecasts for 2015, 2016 and 2017.

Three things to notice
1 – For 2015 the forecast is almost stable close to 1.5% and 1.8% for 2016. In spite of a very accommodative monetary policy, there is no improvement in the growth momentum in the forecasts’ profile. The pace is not so strong and slows moderately with the last publication (in September 2015)
ecb-gowth-forecasts2 – Inflation expectations are revised downward; for 2016 the expected inflation rate is just 1.1%. As there is no strong acceleration on economic activity, this figure could be lower. In this situation, can we expect a convergence to the 2% inflation target before 2020? Continue reading

On the Interpretation of Market Volatility in August

Emmanuel Bourdeix is the co-Chief Investment Officer at Natixis Asset Management and in charge of Seeyond.  He has accepted to share on this blog his interpretation of the strong volatility movements seen on equity markets in August. I’m pleased to invite you to read his posts.

There has not been such fear in equity markets of developed countries since the crises in 2008 and 2011: are we dealing with a simple normalisation of risk, or an exaggerated movement?
While the markets were trying to take a breath after their second-quarter peaks and had consolidated rather quietly until then, the devaluation of the Chinese currency and the associated fears that the Chinese economic slowdown could spread to the rest of the planet triggered a sudden fall in equity markets worldwide.
The Eurostoxx50 fell by 1.88% already on Wednesday, August 19th and – like the other European markets – it posted four consecutive days of increasingly steep declines. On Monday, August 24th it dropped by 5.35% in one trading session, the largest fall since August 2011. Investors, who had become used to volatilities being at low levels by accommodating monetary policies conducted by the main central banks in the last few years, panicked.

Are there actual reasons to be concerned about these movements or is this a simple normalisation of risk? Continue reading