What the f*** is going on?

Attend NIRC 2016 in Copenhagen and get the latest on the macroeconomic and geopolitical risks affecting investor relations going forward.

Af: Thomas Thygesen, Head, X-asset Strategies, SEB Merchant Banking

The global economy is still mired in a structural crisis. Debt levels are higher than in 2007 and interest rates are lower, so the next crisis could be worse than the last one. The big question is how far away it is.

While we are mindful of the tail risks involved, we still think the onset of the next recession is more than a year away, and this is beyond the time horizon of most professional investors. As a result, we are bullish but scared.

Global liquidity conditions started easing at the beginning of the year, and global growth was thus heading for a rebound going into the summer if it wasn’t derailed by a resurgence of political risk after the British referendum.

This risk does not seem to be materializing, the shock is likely to keep policy support in place for longer. This suggests that we might be in for a real upswing after two years where they never lasted more than two months.

The global economy thus continued gaining momentum after Brexit: the global PMI rose more than 0.6 points in July. The US, China and Japan all saw strong gains, while the Euro Zone survey showed a surprisingly modest setback.

The impression of a very modest growth shock in the Euro Zone still needs to be confirmed by real data, but right now it’s hard to see the justification for the big drop in the consensus GDP forecast for 2017.

Implied vols have come down fast, and the near-term outlook is not without risks. Oil is trading below USD40 again, but this time it isn’t aided by a strong dollar, and so far it doesn’t seem to have the same effect.

There is also a risk of bank-related Brexit aftershocks in the EU, and it looks like the US presidential election could also be a tighter contest than most had expected.

Nonetheless, it looks like the global economy may have turned a corner, and the most likely scenario for the coming months is that global liquidity conditions continue easing while growth and inflation expectations rise.

Link to full NIRC programme and registration: IR anno 2016 – Mastering Investor Relations in Changing Times