USA

All quiet

The geopolitical start of 2020 was at times turbulent with developments in Iran. However, it has become clear once again that no party wants to risk the beginning of an escalation spiral. This was particularly striking and also surprising in the case of Iran. However, the way in which the provocation and subsequent de-escalation was provoked and then de-escalated follows a certain pattern that has been observed again and again in recent years. Political issues are likely to continue to dominate in 2020. Above all, the election of the president in the USA in November. There are many reasons for Trump’s re-election. The smouldering impeachment procedure could still prevent him from re-election. But this would require much more evidence and incriminating material against Trump. Otherwise, the US President should be able to rely on his majority in the Senate. Apart from the brexite, there are no major political events in…

China: Downturn pauses, but US deal is not a stimulus package

  The economic downturn in China lost much of its sharpness at the end of 2019. Economic growth did not lose further momentum in the fourth quarter. At an unchanged 6.0% (y/y), the current growth rate is not only in line with market expectations but also just within the growth range set by Beijing – this is still a political issue in China. Certainly, the de-escalation in the trade dispute with the US and the hope for at least a partial settlement have played their part in easing the downward pressure on the Chinese economy. Even if US President Trump initially only took further tariff increases off the agenda, this has given China’s export industry a breathing space in recent months. However, the economic stabilisation does not appear to have been entirely without government stimulus. This suggests the marked acceleration in industrial growth at the end of the year, which…

US deal with China – the „hard chunks“ are yet to come

Just in time for the beginning of the election year, the US government has succeeded in reaching a first interim agreement in the trade conflict with China. The sudden agreement after months of „back and forth“ is certainly due to Trump’s re-election on November 3, which is at stake. But basically it is only a cease-fire with a partial withdrawal of the punitive tariffs already imposed. This can be seen above all in the fact that further trade talks are due to begin immediately. These will then deal with issues such as China’s industrial policy and the protection of intellectual property. In other words, ultimately the really „hard chunks“, where China is unlikely to give in. If these talks stall and even the increase in demand does not match the promised quantities, there is a great danger that the conflict will intensify again. The course of the election campaign is…

2020 is an election year in the USA – a few facts and figures for the stock markets

In a few months the president will be elected in the USA. Today, it is not even known who will run. What is certain, however, is that emotional reporting and daily changing forecasts will soon be on the agenda. Since strong emotions are not known to lead to the best investment decisions and many election forecasts were clearly off target, here are some historical data. Due to the complicated US electoral system, a victory does not require a majority of votes, but a majority of electors. For example, Trump 2016 received only 46% of the votes, but 57% of the electorate. In almost 40% of the elections the winner did not have a majority of the votes. Moreover, the outcome of the election always depends on the result of the „swing states“, which depends on the inclination of the swing voters. Since the Second World War, there have been 18…

Pause confirmed

At its last monetary policy meeting this year, the US Federal Reserve left the key interest rate corridor unchanged and confirmed the pause in the current key interest rate cycle that we had expected. The economic outlook was described as solid. In particular, the labour market is robust. As usual, the Fed press statement was changed only slightly compared to the last meeting. The Fed stated that it would continue to closely monitor the outlook for the economy and inflation, including global developments. The phrase that there was uncertainty about the economic outlook, however, was deleted. The current level of key interest rates was appropriate. The latest statement is therefore slightly more optimistic than the previous communiqué. The Fed members‘ interest rate expectations, which are reflected in the so-called dot plot, were again exciting. In September, the projections of the individual FOMC members indicated that the interest-rate pause would continue…

US economy benefits from rising debt, an example for other countries?

A heated debate has flared up in Germany about the usefulness of the debt brake. The current regulation actually offers the government enough flexibility, but they don’t want to take advantage of it. In the USA, on the other hand, the path is completely different, which has led to a significant increase in the deficit in the state budget. In particular, tax cuts and rising social costs have significantly widened the gap in the US federal budget. Above all, the financial relief for companies and private households has provided positive economic impulses. According to estimates, the tax cuts by the Trump government have relieved companies by around USD 80 billion and private households by around USD 120 billion. This alone should have contributed to growth of around 0.7 percentage points. With expected GDP growth of 2.3% yoy in 2019, this is a not inconsiderable contribution. Whether planned or not, with…

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