September 15, 2017

The acceleration of economic growth in Europe and the inflation in the US advocate for a change in monetary policy

Management comment

The pace of economic growth in the eurozone is accelerating. A number of enlightened forecasters predicted a GDP increase of over 2% in 2017. Although this symbolic threshold may even by surpassed this year, it remains to be seen whether the eurozone will accelerate further in 2018. For the time being, nothing is indicating the contrary. In the US, inflation picked up again during August, to an annualised rate of 1.9%, driven by a possible sharp rise in commodities prices. Strong economic momentum, both in the eurozone and the US, would imply a forthcoming shift in monetary policy, including tapering the ECB asset purchase programme and a rate hike by the Fed, which will also reduce the size of its balance sheet. Bond investors appear to have their path clearly mapped out ahead of them. A lapse in monetary policy is still possible, although the probability is low, given the careful forward-guidance exercise managed by Janet and Mario. Equity markets should therefore welcome a phase of slight steepening in long-term rates, as long as the underlying tension reflects a synchronised improvement in the global economy.

On the microeconomic front, our sense of relative optimism has been bolstered by our latest meetings with company managers. It is interesting to note that digital issues now represent a highly significant proportion of these discussions across all domains and in all sectors. At a time when every individual or professional fears being replaced by a robot and when communities are seeing their destiny “virtualised” in a social network and all companies dread being “Amazonified”,  a conversation between a CFO and his CEO on the LinkedIn network caught our attention. The CFO asked “what happens if we invest in developing our people and then they leave us?”. The CEO replied “what happens if we don't and they stay?”.

Investing in people and their development will always be a key factor for businesses, even if everything seems to indicate that they can be replaced by artificial intelligence.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in September 15th, 2017.

This promotional document is a simplified presentation and does not constitute a subscription offer or an investment recommendation. No part of this document may be reproduced, published or distributed without prior approval from the investment management company.

DNCA Investments is a trademark held by DNCA Finance

The pace of economic growth in the eurozone is accelerating. A number of enlightened forecasters predicted a GDP increase of over 2% in 2017. Although this symbolic threshold may even by surpassed this year, it remains to be seen whether the eurozone will accelerate further in 2018. For the time being, nothing is indicating the contrary. In the...
2017-09-15