Schroders Economic Infographic Nov 2015
Recession fears worry the US
The world economy appears slow moving, unstable and vulnerable to shocks.
Recent growth scare has highlighted
the world economy’s vulnerability to
a downturn in activity
What could tip the bike over,
triggering a recession?
Fears that the cantral
banks do not have
firepower to deal
with an adverse shock
Increase
in inflation
Interest rates remain
close to zero. While
quantitative easing
is an option, there
are doubts about
its efficacy
Pandora’s ‘tax-credit’ box
The proposed reforms by UK Chancellor, George
Osborne, to tax credits have raised concerns
about the government’s narrative of helping the
working poor
Problem: strategic error by the Chancellor, as most
people have forgotten the tax cuts in past years
Funding
crisis for
the budget
deficit
Slowdown in
corporate
profits
Risk appetite returns
Markets have steadied
over the past month
S&P500 beginning to
approach previous highs
S&P500
Concerns over a hard
landing in China have
not been realised
Policymakers have become
more sensitive to the risks
facing the economy
Three factors support this:
Federal Reserve’s decision not to raise rates, helped calm
emerging markets
Benefits:
Tax free
personal
allowance
Introduction of
the national
living wage
Increased
provision of
free childcare
A truce in the currency wars: the Chinese Yuan has not devalued
and the Bank of Japan has not increased its quantitative and
qualitative easing programme
Comments from the European Central Bank and actual rate cuts
by the People’s Bank of China have improved risk appetite
Corruption continues to cripple Brazil
President Dilma Rousseff has suffered a series of painful setbacks since her election victory
Political and economic paralysis
in Brazil has seen a wave of
growth and credit downgrades
Petrobras scandal continues
to spread
Economic activity continues to
flatline with:
• poor corporate investment
• consumers crushed by debt burden
• government spending squeezed
However, an early Rousseif exit
could be helpful for Brazil, clearing
way for a more market-friendy,
scandal-free government
Source: Schroders as at November 2015.
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