Newell Palmer: Monthly Economic Notes – December 2019

Newell Palmer: Monthly Economic Notes – December 2019

Economic Overview

2019 has been unpredictable for investors, with weaker economic growth and ongoing geopolitical tensions resulting in heightened volatility for investment markets.  Looking ahead to 2020, the themes of weaker economic growth and geopolitical tensions are expected to continue.  Trade friction and broader economic and policy uncertainty is expected to reduce economic growth and continue to generate volatility in markets.

Monthly-Notes-December-2019.pdf

Newell Palmer: Monthly Economic Notes – November 2019

Newell Palmer: Monthly Economic Notes – November 2019

Economic Overview

The two main developments in the past month are:

1. More strident commentary from the IMF and central banks that monetary policy (whether adopting low interest rates or quantitative easing policies) are becoming less effective to support economic growth as interest rates are already very low, and that fiscal policy (via increased government spending and lower taxes) will have to step in. However, most governments have been reluctant to adopt looser fiscal policies to-date, but this may change in the coming year.

2. Growing realisation in the US and China that the ongoing trade dispute and escalating tariffs are impacting the US and Chinese economies, with signs that tariffs may be wound back and a trade agreement could be signed.

Monthly-Notes-November-20191.pdf

Newell Palmer: Monthly Economic Notes – October 2019

Newell Palmer: Monthly Economic Notes – October 2019

Economic Overview

Globally, we have seen weak economic growth, and increasing fears of a slowdown or a possible recession in the next few years.  As such, central banks have taken action to support the economic expansion by reducing interest rates.  With European, Japanese and Australian interest rates at either negative yields or very low yields, central banks have reached the limits of conventional monetary policy.  This leaves them with unconventional monetary policy such as quantitative easing (i.e. buying bonds) to further reduce long-term interest rates.  Increasingly, central banks have now said that it is up to governments to start introducing fiscal stimulus, e.g. tax cuts or increased government spending, to complement monetary policy.  Among the major developed economies, only the US has a positive nominal interest rate at 1.8%, but as the US Federal Reserve continues to reduce interest rates, a fiscal policy response may also be required in the US if the economy deteriorates.

Monthly-Notes-October-20191.pdf