The Fed gets more concerned: no rate hikes in 2019, earlier end of the balance sheet runoff

The Fed appears more concerned about the short and medium economic outlook, and stepped up the dovish attitude taken since the January meeting. The median number of appropriate rate hikes for this year has been slashed from two to none. 

Highlights:

  • In an acceleration of the dovish pivot undertaken since December, the Fed has marked down the growth and inflation outlook for this year and next.
  • Consequently it now envisages only one more rate increase, in 2020. The fed fund rate will then remain below its long term value for the next three years.
  • Moreover, the balance sheet Runoff will end by the end of September, a couple of months earlier than we expected; the pace of balance sheet reduction will slow down from May.

Download the full publication below

THE FED GETS MORE CONCERNED: NO RATE HIKES IN 2019, EARLIER END OF THE BALANCE SHEET RUNOFF

RELATED INSIGHTS

COVID-19 FACTS & FIGURES
According to the IMF’s Managing Director, strong international cooperation on coronavirus vaccine could speed up the world economic recovery and add $9 trillion to global income by 2025. A WHO trial found that Remdesivir, Hydroxychloroquine, Lopinavir and Interferon have little or no effect on hospitalized Covid-19 patients. Gilead Sciences has questioned the findings of the WHO study saying data appeared inconsistent.
INCORPORATING QUANT SIGNALS INTO EU EQUITY SECTOR/STYLE STRATEGY: MAINTAIN A TILT TO CYCLICALS AND VALUE
We present an update of our proprietary equity valuation tool, based on quant models. It provides indications of over- or undervaluation for different sectors and styles of European equities, which is further enriched by our qualitative analysis. Currently, among European equity sectors, financials, energy, telecoms, and autos look undervalued while Pharma, utilities and software appear overvalued.
CHINA’S RECOVERY CONTINUED BUT A BIT SOFTER THAN EXPECTED
China's economic recovery continued in Q3 2020, although a bit softer than expected. Real GDP growth rose to 4.9% yoy, slightly below the Reuters consensus expectation of 5.2% yoy, but still a substantial upturn from the 3.2% yoy in Q2. On a quarterly base, growth dynamics softened to 2.7% qoq, after 11.7% qoq and -10% qoq in the two previous quarters.