Inequality Street

The Gini coefficient

The key beneficiaries of quantitative easing (QE) have been those closest to the money – a small number of individuals who own assets, who run companies and who have access to the cheap debt. The result? Growing inequality in society. For example, in the US the Gini coefficient (a measure of wealth dispersion across society) is at a level not seen since the 1930s. Across the money-printing world, the gap between the 1% and the 99% is widening.

Income inequality is one of many factors contributing to the fragile nature of the economic backdrop and challenging the common belief that all is right with the world. Recent elections across Europe point to unease – that political campaigning across developed nations was focused upon the 99% further supports these views. More broadly, if economies fail to accelerate from here (still to be proven) those questioning the effectiveness of QE will become more vociferous and greater in number. Could it be that ECB President Mario Draghi is going to start ‘using’ just as we find out that the drugs don’t work?

Nick Clay, Portfolio Manager, Newton

The key beneficiaries of quantitative easing (QE) have been those closest to the money – a small number of individuals who own assets, who run companies and who have access to the cheap debt. The result? Growing inequality in society. For example, in the US the Gini coefficient (a measure of wealth dispersion across society) is at a level not … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
The week that was…

In the week ending 12th June, what stole the financial headlines

With relations between Ukraine and Russia already at breaking point, Ukraine’s prime minister ordered his government to prepare for a possible cut-off in natural gas supplies from Russia. This followed failed negotiations with Russian state-controlled Gazprom. Ukraine owes close to US$2bn in unpaid gas bills to Gazprom and the Russian giant has suggested it will demand pre-payment in the future. Meanwhile, three weeks after the US Justice Department accused China of hacking operation aimed at advancing its satellite and aerospace programmes, a private US report accused another Chinese military unit of similar infringements. Elsewhere, talk on Capitol Hill returned to US fiscal policy. In a speech in New York, US Treasury Secretary Jack Lew said US fiscal policy was now under control as he set out ambitious reform.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 13/06/14. ISSG is part of The Bank of New York Mellon.

With relations between Ukraine and Russia already at breaking point, Ukraine’s prime minister ordered his government to prepare for a possible cut-off in natural gas supplies from Russia. This followed failed negotiations with Russian state-controlled Gazprom. Ukraine owes close to US$2bn in unpaid gas bills to Gazprom and the Russian giant has suggested it will demand pre-payment in the future. … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
Brazil v Mexico

Latin America's Economic Derby

As Brazil takes on Mexico in the second round of Group A fixtures in the football World Cup, few eyes will be on the countries’ head-to-head economic battle. But while the Seleção are hot favourites to beat their Latin American rivals on the pitch, Mexico is in the ascendency when it comes to economics. Brazilian President Dilma Rousseff is facing increased pressure from her electorate for radical reforms, the like of which the Mexican government has been implementing over the past few years. Brazilian World Cup glory could provide Dilma with a short-term popularity bounce but with elections looming in October, she faces a battle for her political future.

As Brazil takes on Mexico in the second round of Group A fixtures in the football World Cup, few eyes will be on the countries’ head-to-head economic battle. But while the Seleção are hot favourites to beat their Latin American rivals on the pitch, Mexico is in the ascendency when it comes to economics. Brazilian President Dilma Rousseff is facing … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
The week that was…

In the week ending 6th June, what stole the financial headlines?

Global equity markets were boosted by further good news emanating from the US employment market. While the headline unemployment rate remained unchanged at 6.3%, US employment has returned to its pre-financial crisis level, with the economy recouping the 8.7 million jobs it lost during the recession. In Europe, Russian President Vladimir Putin came face to face with his Ukrainian equivalent, Petro Poroshenko, for the first time during the 70th anniversary commemoration of the D-Day landings. Meanwhile, Russians are more hostile towards the West than at any time since the break-up of the Soviet Union, according to the country’s leading independent pollster Levada-Centre. Finally, Chinese state media launched a publicity offensive against Google and other US technology companies as the Chinese administration ramped up its spat with the US over cyber espionage.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 10/06/14. ISSG is part of The Bank of New York Mellon.

Global equity markets were boosted by further good news emanating from the US employment market. While the headline unemployment rate remained unchanged at 6.3%, US employment has returned to its pre-financial crisis level, with the economy recouping the 8.7 million jobs it lost during the recession. In Europe, Russian President Vladimir Putin came face to face with his Ukrainian equivalent, … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
Markets downplay Thai coup

The Thai coup on 23 May shocked many outsiders but the country’s historical record of the last two decades suggests there isn’t too much cause for alarm for investors. This is Thailand’s 12th coup since 1932 and may mark an attempt to re-start the political process. In the last two coups, in 1991 and 2006, a restoration of a democratic political process has taken around 450 and 570 days, respectively. In the interim, there has been no collapse of domestic activity or a financial crisis. However, the latest military intervention could face greater political headwinds and leaves investors with less room for complacency.

Aninda Mitra, senior sovereign analyst, Standish

The Thai coup on 23 May shocked many outsiders but the country’s historical record of the last two decades suggests there isn’t too much cause for alarm for investors. This is Thailand’s 12th coup since 1932 and may mark an attempt to re-start the political process. In the last two coups, in 1991 and 2006, a restoration of a democratic … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
The week that was…

In the week ending 29th May, what stole the financial headlines?

Russia and its ongoing stance on Ukraine continued to dominate the headlines. This follows Russia’s recent announcement of a 30-year gas deal with China – a move that signifies a notable trading shift away from Europe and the West. Elsewhere, the rally in emerging market currencies has showed signs of stalling in recent weeks amid central bank policy action. Meanwhile, US President Barack Obama was accused of a lack of tact as he became embroiled in a war of words between the Chinese and Japanese governments with regards to disputed territories in the South China Sea.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 30/05/14. ISSG is part of The Bank of New York Mellon

Russia and its ongoing stance on Ukraine continued to dominate the headlines. This follows Russia’s recent announcement of a 30-year gas deal with China – a move that signifies a notable trading shift away from Europe and the West. Elsewhere, the rally in emerging market currencies has showed signs of stalling in recent weeks amid central bank policy action. Meanwhile, … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
M&A activity takes off

Global $10bn+ M&A volume

We have just witnessed one of the strongest starts to the year in M&A in a decade. Financing markets are a key ingredient, as interest rates remain near cycle lows and at absolute low levels for companies to lock in long-term financing. In a slow-growth environment, improving CEO confidence is helping to fuel decisions to buy competitors. Policy uncertainty has diminished somewhat as the economic cycle has progressed. Finally, as the share prices of many acquirers have been faring well, peer companies are incentivised to contemplate their long-term competitive positioning.

James M. Boyd, The Boston Company Asset Management

We have just witnessed one of the strongest starts to the year in M&A in a decade. Financing markets are a key ingredient, as interest rates remain near cycle lows and at absolute low levels for companies to lock in long-term financing. In a slow-growth environment, improving CEO confidence is helping to fuel decisions to buy competitors.  Policy uncertainty has diminished … read more

  • Download
  • Print
0 comments | Join the conversation, comment now