The revolution set to save industries $421bn per year

Industry 4.0 – our name for the fourth Industrial Revolution – uses smart technology to enhance manufacturing processes, making them more efficient and more easily adaptable to customer needs. It promises the integration of automation, data, analytics and manufacturing to deliver new business and operating models. Computers and robotics will come together in an entirely new way in ‘smart factories’. Robots will be connected remotely to digital systems equipped with machine learning algorithms. These systems will analyse information coming from the shop floor and control the production line, making decisions with minimal input from human beings.

Future production lines will employ a fraction of the people currently needed, so the impetus for production to happen in low-wage locations may become less important. There may also be a greater need for software engineers who can monitor increasingly complex systems on-site and less need for manual labour.

For these reasons, Industry 4.0 could mean greater investment in production within Europe and the US. As a consequence, the production shift in the late 20th and early 21st centuries to low-wage economies, such as Mexico and Bangladesh, may be reversed. Inevitably, a revolution on this scale will likely shift economic distribution, both from country to country as well as from labour to capital. This could be the most material long-term consequence of Industry 4.0.

Walter Scott Global Equities team

Industry 4.0 – our name for the fourth Industrial Revolution – uses smart technology to enhance manufacturing processes, making them more efficient and more easily adaptable to customer needs. It promises the integration of automation, data, analytics and manufacturing to deliver new business and operating models. Computers and robotics will come together in an entirely new way in ‘smart factories’. … read more

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Signs of a turning tide in Latin America

Latin America is in the throes of a prolonged fall from grace. After growth rates averaging above 5% for the first decade of the new millennium, a maelstrom of falling commodity prices and a slowdown in demand from China means forecasters are predicting neutral or negative growth through 2015.

But the winds of political change are blowing. In Argentina, burdened with high government debt and an overvalued currency, an October election could indicate a new start since all potential candidates are seen as more market-friendly than current president Cristina Fernandez. In Venezuela, likewise, a mid-term election in September could be a bellwether of popular discontent over Nicolás Maduro’s presidency, especially given inflation above 60% and an economy forecast to shrink 7% this year.1 Midterms in Mexico in July and in Colombia in October could herald similar clues as to the future direction of these important regional economies.

Colm McDonagh – Insight, A BNY Mellon company

1 IMF forecasts, April 2015

Latin America is in the throes of a prolonged fall from grace. After growth rates averaging above 5% for the first decade of the new millennium, a maelstrom of falling commodity prices and a slowdown in demand from China means forecasters are predicting neutral or negative growth through 2015. But the winds of political change are blowing. In Argentina, burdened … read more

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The week that was…

In the week ending 9th October, what stole the financial headlines?

The battle to slow the land gains of the Islamic State in Iraq and Syria continued. With ongoing air strikes from the West and its allies, Islamic fighters advanced apace as they seized a significant portion of the Syrian border town, Kobani. With the US ruling out a ground operation, both the German and UK governments put pressure on Turkey – which borders Kobani – to help the ailing Kurdish town. In the US, the release of the September minutes from the Federal Open Market Committee meeting showed members expressed concerns over the potential negative impact of weaker foreign growth on the US economy.

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

The battle to slow the land gains of the Islamic State in Iraq and Syria continued. With ongoing air strikes from the West and its allies, Islamic fighters advanced apace as they seized a significant portion of the Syrian border town, Kobani. With the US ruling out a ground operation, both the German and UK governments put pressure on Turkey … read more

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The week that was…

In the week ending 2nd October, what stole the financial headlines?

The battle between the West and Islamic State militants intensified. Backed by a number of Middle Eastern states, the US-led air campaign gained additional backing as both the Australian and Canadian governments pledged military support. Canada’s government has promised CF-18 fighter jets and refuelling and surveillance aircraft. Meanwhile, the anti-Islamic State movement gained further traction as Turkey, thus far reluctant to take a frontline role against the militants, signalled it may send troops into Syria or Iraq and let allies use its air bases. Elsewhere, positive US jobs data raised the possibility of an early interest rate hike by the US Federal Reserve. September’s job report showed the unemployment rate had fallen to 5.9%, its lowest level since August 2008.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 03/10/14. ISSG is part of The Bank of New York Mellon.

The battle between the West and Islamic State militants intensified. Backed by a number of Middle Eastern states, the US-led air campaign gained additional backing as both the Australian and Canadian governments pledged military support. Canada’s government has promised CF-18 fighter jets and refuelling and surveillance aircraft. Meanwhile, the anti-Islamic State movement gained further traction as Turkey, thus far reluctant … read more

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Brazil prepares to pass judgement on Dilma’s economic record

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. She, by contrast, has blamed the negative effects of crises abroad and a faltering global economy.

The electorate goes to the polls on 5 October. If no candidate gains more than 50% of the vote, a second round run-off will be held on 26 October.

Once the election question has been settled would you be more or less inclined to invest in Brazil? Join the debate and let us know your thoughts using the comment button below.

With the first round of Brazilian general election this weekend, President Dilma Rousseff looks in real danger of losing out. With a dubious economic record since she assumed power on 1 January 2011, Dilma has been criticised for interventionist policies which, while beneficial to vast swathes of the population in the short term, have hamstrung the economy in the long term. … read more

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The week that was…

In the week ending 18th September, what stole the financial headlines?

The Middle East and the battle against the Islamic State of Iraq and the Levant, also known as Isis, remained firmly in the spotlight as the West upped the ante with further air strikes and attempts to bolster regional support. Indeed, the French president, François Hollande reported that French military aircraft had carried out air strikes in Iraq – its first for 15 years. Meanwhile, the US House of Representatives approved President Barack Obama’s plans to train and arm moderate Syrian rebels. The US$500m funding proposal is aimed at squeezing Isis forces in Syria. However, question remain over whether the US is prepared to send ground troops to the region. While Obama has ruled this out, the US army chief of staff, General Ray Odierno was quoted last week as saying air strikes alone will not be enough to destroy Isis.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 19/09/14. ISSG is part of The Bank of New York Mellon.

The Middle East and the battle against the Islamic State of Iraq and the Levant, also known as Isis, remained firmly in the spotlight as the West upped the ante with further air strikes and attempts to bolster regional support. Indeed, the French president, François Hollande reported that French military aircraft had carried out air strikes in Iraq – its … read more

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Are markets set for a dose of reality?

Live Charts from MarketEye

Almost six years on from the US Federal Reserve’s first injection of QE, the landscape created by loose global monetary policy remains somewhat distorted. Despite consistent economic disappointment, the zero interest-rate backdrop has forced investors to chase returns. Meanwhile, greater confidence in the ability of central banks to backstop markets has fed risk appetites.

With this backdrop of lower growth and increased volatility likely to remain in place for some time to come, Newton’s Global Higher Income team continues to believe it is appropriate to invest in those companies whose business models are durable, self-financing and structurally driven in order to weather the risks that still persist. A good yield and growing income is likely to remain an important driver of investor’s total returns.

Newton Global Higher Income team

Almost six years on from the US Federal Reserve’s first injection of QE, the landscape created by loose global monetary policy remains somewhat distorted. Despite consistent economic disappointment, the zero interest-rate backdrop has forced investors to chase returns. Meanwhile, greater confidence in the ability of central banks to backstop markets has fed risk appetites. With this backdrop of lower growth and … read more

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The week that was…

In the week ending 11th September, what stole the financial headlines?

With the conflict in Iraq and Syria showing little sign of abating, US President Barack Obama upped the ante with a prime-time televised address in which he outlined his strategy to “degrade and ultimately destroy” the Islamic of Iraq and the Levant, also known as Isis. As part of this strategy, the Obama administration moved to secure backing from various Arab leaders and European allies. Indeed, 10 Arab states, fronted by Saudi Arabia, announced they would join the fight against Isis, while Germany, France and the UK have also thrown their support behind the plans, although the full extent of the latter’s involvement remains unclear. Back at home, US lawmakers pledged broad support behind the president’s plans but fears of an open-ended conflict continue to weigh on the shoulders of the key decision makers. The White House has already requested around US$500m in funds to aid moderate Syrian rebels fighting Isis.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 12/09/14. ISSG is part of The Bank of New York Mellon.

With the conflict in Iraq and Syria showing little sign of abating, US President Barack Obama upped the ante with a prime-time televised address in which he outlined his strategy to “degrade and ultimately destroy” the Islamic of Iraq and the Levant, also known as Isis. As part of this strategy, the Obama administration moved to secure backing from various … read more

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The week that was…

In the week ending 4th September, what stole the financial headlines?

Unrest for the West continued apace as troubles in Ukraine and Iraq showed little sign of abatement. With its interference the wrong side of the Ukrainian border still largely unchecked, Russia looks set to be the subject of further economic sanctions by the EU. Indeed, it is preparing to ban Russian state-owned oil companies from raising funds in European capital markets. Such action would hit some of the country’ s largest energy groups. Meanwhile, US President Barack Obama, in Europe for the Nato summit, was the subject of criticism for his failure to develop and implement a workable strategy with which to deal with Russia’s advances. To date, Obama has repeatedly stated his desire for a diplomatic solution. Elsewhere, US air strikes in Iraq continued in an attempt to blunt the Islamic State’s rapid progress through the country. Following the execution of US journalist Steven Sotloff, the second beheading in a matter of weeks, the US president told a news conference of the US’ desire to “degrade and destroy” Islamic State.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 05/09/14. ISSG is part of The Bank of New York Mellon.

Unrest for the West continued apace as troubles in Ukraine and Iraq showed little sign of abatement. With its interference the wrong side of the Ukrainian border still largely unchecked, Russia looks set to be the subject of further economic sanctions by the EU. Indeed, it is preparing to ban Russian state-owned oil companies from raising funds in European capital … read more

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Abenomics: what’s left in the quiver?

Aggregate wage income

We believe the decline in real wages should prove temporary. If firms can charge higher prices without paying higher wages, their profits will increase. Fatter profits will encourage firms to expand their operations and tempt new rivals to enter the market. That in turn will increase hiring and, in time, bid up wages to match the higher prices. The reflection of Japan’s economy should be a prelude to higher real wages not a threat to them.
Miyuki Kashima, Head of Japanese Equity Investment, BNY Mellon Asset Management Japan

We believe the decline in real wages should prove temporary. If firms can charge higher prices without paying higher wages, their profits will increase. Fatter profits will encourage firms to expand their operations and tempt new rivals to enter the market. That in turn will increase hiring and, in time, bid up wages to match the higher prices. The reflection … read more

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