July 21, 2017

Mario Draghi’s comments downward markets trend

Management comment

Procrastination by central bankers is still causing slight tension on the markets. Indeed, Mario Draghi cooled off investors that had been warmed by Janet Yellen's reassuring message on US growth. The ECB will therefore not be making any announcements about its asset purchase programme before the last quarter of this year. Apart from this shift in communication, the ECB nevertheless underscored the endogenous strength of European growth.

In the US, the Trump administration is racking up failures in all attempts to implement its campaign promises (overturning Obamacare, tax stimulus, migratory decree). The counter-powers (legal or political) are therefore at work in the most powerful democracy in the western world. Observers are beginning to understand that Donald Trump may not have any influence over US growth that seems to feed itself. How the US cycle will continue is the main unknown. In the past, the US has already witnessed longer expansion cycles (10 years during the 1990s). Countries even exist that have enjoyed uninterrupted growth for more than 25 years. Indeed, Australia holds the record for the number of recession-free quarters (103) with a recession defined technically as being a decline in GDP for two quarters in a row. Australia ousted the Netherlands from the previous top-spot with 83 quarters in a row of uninterrupted growth.

As such, it is possible to grow even in complicated backdrops as long as an efficient economic system has been built that is in harmony with the globalisation and digitalisation of economies. This is one source for reflection for certain European leaders for whom the task of correcting the excesses of a provident state that has run out of steam looks enormous.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in July 21st, 2017.

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Procrastination by central bankers is still causing slight tension on the markets. Indeed, Mario Draghi cooled off investors that had been warmed by Janet Yellen's reassuring message on US growth. The ECB will therefore not be making any announcements about its asset purchase programme before the last quarter of this year. Apart from this shift...
2017-07-21