Europe: How big will the interest rate shock be in 2023?

Against the background of rising interest rates and a worsening economic outlook, still favorable credit dynamics in the Eurozone are unlikely to last for much longer. After a year of stabilizing lending standards, banks have become significantly more risk averse.

Black Friday for consumers, bleak Friday for retailers?

US discretionary retail sales (durable goods, apparel, entertainment and leisure goods) peaked in Q3 2022, mostly driven by prices. In the same period, retailers had an estimated USD54bn in additional inventories vs 2021.

Financial globalization: moving towards a polarized system?

The Covid-19 crisis and, more recently, the war in Ukraine have led to some re-thinking of financial globalization. In particular, large emerging countries are showing growing discontent against the Western USD-centered framework. 

Africa’s journey to net zero: USD7trn just for energy

The green energy transition is a once-in-a-lifetime opportunity for African development, a chance to reduce poverty and lift growth potential. To reap this opportunity, there are three levers to pull: strengthening political stability and the rule of law, reducing project risks by adopting blended finance, and formulating clear green-energy strategies backed by economy-wide transition plans with sector-specific pathways. This paper aims at the last point, providing guidance for governments and investors alike.

Fixed income is back

In 2022, the record bear run across asset classes has eliminated any diversification benefits, leaving investors with no place to hide. Realized and expected monetary policy moves drove most of fixed income and equity performance. 

US midterms: Republicans are back, (fiscal) policy impasses too

With the Republican party now in control of the House of Representatives (results for the Senate to follow), no major economic and fiscal legislation will be pushed through in the next two years. 

EU fiscal rules – quo vadis?

Next week, the European Commission is expected to propose the most ambitious overhaul of the EU fiscal framework in more than two decades. Given the rapid rise in debt ratios during the pandemic and the current energy crises, the application of the current rules, which are currently suspended, would require unrealistically large – and counterproductive – fiscal adjustments by some high-debt countries.  

Picking up contagion in equity and commodity markets

In an uncertain world, it is essential to diversify investment portfolios. But this is not always easy. When more and more risky-asset markets are rising simultaneously it often is a sign that the risk of a broad-based collapse in asset values is building up. 

Brazilian elections: The calm before the storm?

Unlike in previous elections, there are few signs of politically driven stress on Brazilian markets. Yet, Brazilian markets are in for a reality check in 2023. The results of the first round of the Presidential elections have reduced the likelihood of extreme policies: markets are familiar with both candidates.