Analysts from Brown Brother Harriman, believe there are two broad forces that will shape the investment climate in developed markets: policy actions and politics.
Key Quotes:
“Policymakers and investors will be monitoring the impact of policy actions taken over the last couple of months. Several major central banks including the European Central Bank (ECB), the Bank of Japan (BOJ) and the People’s Bank of China (PBOC) eased monetary policy. For its part, the Federal Reserve refrained from hiking rates in March, which in December it suggested was likely. Barring a new shock or a marked turn in the economic data, we expect the Federal Reserve to hike rates at the June Federal Open Market Committee (FOMC) meeting. We continue to expect at least one hike in H2 as well.”
“The second broad force shaping the investment climate is politics. The UK referendum on continued membership in the European Union is the obvious highlight, but that is not all. The Dutch will hold a referendum on EU membership for Ukraine, which could have wider political implications. There will be local elections in the UK and Italy in May which could have consequences for the national parties. Meanwhile, despite elections, Spain, Ireland and Slovakia have been unable to cobble out coalition governments.”
“In the US, nominations for the two main political parties will become considerably clearer as the quarter progresses, but the formal conventions are in the second half of July. The event markets assess similar odds (23%) that Donald Trump is the next US President as the UK votes to leave the EU. While investors responded dramatically to the latter, the former has yet to emerg
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