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Global economic recovery continues but remains uneven, says OECD
September 21, 2021--The global economy is growing far more strongly than anticipated a year ago but the recovery remains uneven, exposing both advanced and emerging markets to a range of risks, according to the OECD's latest Interim Economic Outlook.
The OECD says extraordinary support from governments and central banks helped avoid the worst once the COVID-19 pandemic hit.
With the vaccine roll-out continuing and a gradual resumption of economic activity underway, the OECD projects strong global growth of 5.7% this year and 4.5% in 2022, little changed from its May 2021 Outlook of 5.8% and 4.4% respectively.
Countries are emerging from the crisis with different challenges, often reflecting their pre-COVID 19 strengths and weaknesses, and their policy approaches during the pandemic. Even in the countries where output or employment have recovered to their pre-pandemic levels, the recovery is incomplete, with jobs and incomes still short of the levels expected before the pandemic.
view the OECD Economic Outlook, Interim Report Keeping the Recovery on Track September 2021
Winthrop Capital Management-The Calm before the Storm
September 21, 2021--The current period feels like we are in the proverbial "calm before the storm." The markets are quiet at elevated valuations, trading in a tight range. Bond yields are trending lower. The economic recovery appears to be running out of gas. Congress is trying to address the next round of fiscal stimulus wrapped up in a $3.5 trillion infrastructure bill. In addition, the Federal Reserve has begun its narrative around tapering this year, its process to withdraw monetary stimulus from the markets.
Over the past 18 months, the financial news has been dominated by the Covid-19 virus, including the massive push to control the spread, the rush to bring vaccines, and economic stimulus needed to support the crippled economy. Despite great progress, we have entered into a new stage of trying to reopen the markets and live with the Covid variant. We are in a cautiously optimistic period of getting kids back into the classroom, finding methods to gather the public for sporting events and entertainment, and encouraging workers to re-enter the labor market. We expect the equity market is vulnerable to negative news.
The Economics of Social Unrest-Economic analysis can shine a revealing light on the causes and consequences of social unrest
September 21, 2021--The past decade was marked by a series of high-profile social protests-the Arab Spring, Black Lives Matter, the Gilets Jaunes, and Occupy Wall Street, to name just a few. Yet while there has been a lot of soul-searching about their causes and consequences, and even though many commentators have pointed their fingers at economic forces, the economics profession has been relatively slow to respond. Indeed, rigorous quantitative economic analysis of social unrest is scant, with evidence limited to isolated cases until recently.
However, a new body of IMF staff research is filling this gap by analyzing the risks and economic costs of social unrest.
Measuring unrest
A key challenge when researching social unrest-defined as protests, riots, and other forms of civil disorder and conflict-is identifying when such events have occurred. Although sources of information are available, many are sporadic or are inconsistent in their coverage.
BIS-An inflation process in flux: BIS Quarterly Review
September 20, 2021--New study shows that price changes in narrowly defined sectors account for most of the fluctuations in consumer price inflation, indicating that the recent rise in inflation is likely to be transitory.
The study also finds that in an environment of sector-specific price changes, monetary policy is limited in its ability to steer inflation within tight ranges, putting a premium on flexibility in pursuing inflation targets.
Financial markets sent mixed signals in the period under review, with some developments pointing to an upbeat outlook while others indicated unease.
In a regime of low and stable inflation, most of the fluctuations in headline inflation are due to price swings in finely defined expenditure categories rather than to generalised price movements, according to a new study released today in the Quarterly Review of the Bank for International Settlements (BIS). These changes tend to have only a transitory impact of inflation, which is thus more likely to remain range-bound.
Climate change ETFs found to be undermining war on global warming
September 20, 2021--Academic research shows the funds also starve sectors of capital to invest in transition to cleaner energy
Climate-focused investment funds are undermining the fight against global warming by routinely engaging in greenwashing, academic research has claimed.
Passive exchange traded funds tracking "low carbon", "climate change" or "Paris-aligned" indices allocate little of their money to the greenest companies and habitually increase the weighting of companies whose environmental performance is deteriorating.
To Safeguard Global Financial Stability, Boost the Resilience of Investment Funds
September 17, 2021--Our brush last year with one of the biggest economic shocks of our lifetimes revealed some fundamental vulnerabilities that could affect global financial stability. Caught up in the financial market turmoil generated by risk averse investors, many investment funds were heavily affected by the "dash-for-cash" that extended across borders-and which triggered significant outflows from risky assets and from emerging and developing economies.
As this happened, and investor capital flowed out of money market and open-end mutual funds, asset managers were forced to fire-sell these assets, which accelerated the drying up of liquidity and the drop in market value of key assets.
IMF-Departmental Paper-Investment Funds and Financial Stability: Policy Considerations
September 17, 2021--Summary:
The paper's analysis underscores the importance of the ongoing Financial Stability Board-led process of identifying policy options, involving national authorities and the International Organization of Securities Commissions and other standard setters.
In this context, the global nature of the investment fund business and fungibility of financial flows makes it vital to ensure consistency of global policy choices that can secure financial stability by precluding regulatory arbitrage.
Regulation and respectability amid the rapid evolution of cryptoassets
September 16, 2021--If recent news is anything to go by, the cryptoasset industry is continuing to evolve at breakneck pace.
In the last few weeks alone, El Salvador became the first country to accept digital currency as legal tender, the UK's Financial Conduct Authority (FCA) called for more powers to protect consumers from risky crypto ventures promoted by influencers like Kim Kardashian, and Jay Clayton (former head of the Securities and Exchange Commission) became the latest high-profile regulator to turn to the crypto industry.
Despite this rapid transformation, many observers still think of it as being akin to the Wild West after the Silk Road darknet marketplace or criminally-complicit trading exchange Liberty Reserve-scandals that marred crypto's early years.
Trackinsight-ETF markets in focus: August 2021-Investors have flocked to ETFs over 2021, adding $789 Billion of flows year-to-date
September 16, 2021---ETFs on track to hit $10 trillion AuM, but European ETF flows slow
Having smashed through the $9 Trillion AuM barrier in July, growth continued, but slowed over August, according to the latest data from Trackinsight, setting the industry up for a record-setting year of unprecedented growth and issuance.
Over August, the 7,400 ETFs covered by Trackinsight saw $86.2 Billion of new flows to command a total of $9.32 Trillion in AuM. Investors have flocked to ETFs over 2021, adding $789 Billion of flows year-to-date.
Competing for this wave of new money are over 559 new ETFs which have launched this year, including over 160 actively-managed ETFs and 119 ESG ETFs. This far exceeds the 458 launches seen in 2020, indicating that ETFs have become the preferred distribution technology for asset managers promoting their investment ideas.
G20 GDP growth slows to 0.4% in the second quarter of 2021, but large differences exist across countries
September 15, 2021--Gross domestic product (GDP) of the G20 area grew by 0.4% in the second quarter of 2021, down from 0.9% in the first quarter of 2021. However, this figure conceals large differences in the growth observed across countries.Among the G20 economies, GDP growth slowed in Turkey(to 0.9%, from 2.2%),Korea(to 0.8%, from 1.7%) and Australia(to 0.7%, from 1.9%). GDP contracted sharply in India(by (minus) 10.2%, after 2.3% growth).
GDP also contracted, to a lesser extent, in Canada (by (minus) 0.3%, after 1.4% growth) and Brazil (by (minus) 0.1%, after 1.2% growth). GDP growth resumed in the United Kingdom(to 4.8%, following a contraction of (minus) 1.6%),in the European Union as a whole (to 2.1%, following a contraction of (minus) 0.1%), in Germany (to 1.6%, following a contraction of (minus) 2.0%), in Saudi Arabia (to 1.1%, following a contraction of (minus) 0.5%) and in Japan(to 0.5%, following a contraction of (minus) 1.1%).
Remaining G20 economies recorded accelerating growth rates in the second quarter of 2021: Italy (2.7%, from 0.2%), the United States (1.6%, from 1.5%), Mexico(1.5%, from 1.1%), China and Indonesia (1.3% in both countries, from 0.4% and 0.3%, respectively) and France(1.1%, from 0.0%).