http://www.economist.com/news/finance-and-economics/21721649-american-share-valuations-are-higher-now-eve-financial May 2007: cyclically adjusted price-earnings ratio (CAPE), a measure that averages profits over ten years, was 27.6 for American equities. By March 2009 the CAPE had fallen by more than half. Central banks then took action, slashing interest rates and buying assets via quantitative easing (QE) Stockmarkets rapidly recovered and the S&P is now…… Continue reading American share valuations: overpriced?
Deutsche Bank: predicts S&P 500 has had 10 out of 11 days with a move of less than 0.2%, the quietest period since 1927 The volatility index (Vix) fell to a 23 year low after the French election result – a striking contrast to the political turmoil of the Trump administration, North Korea tensions, and…… Continue reading Recent complacency in financial markets
The Chinese government provides cheap loans to its industries (grants, low-interest loans, cheap energy, raw materials, and free land grants), encouraging overcapacity – its output has soared in recent years. Since China joined the WTO in 2001, its aluminium production has risen from 14$ of the global total to 54% in 2016 Since businesses are…… Continue reading How Chinese overcapacity affects international producers
Two opposing views: Conservative/right: lower corporate tax rates will lead to more business investment and thus faster economic growth. Hence the stock market enthusiasm after President Trump was elected on platform of tax cuts Left: belief that business not paying appropriate amounts of tax and should be charged more to pay for spending commitments. Hence…… Continue reading Relationship between business tax and revenue
June 14th: the US Federal Reserve lifted interest rates by a quarter of a percentage point to a range of 1-1.25% Excluding food and energy, prices are only 1.5% higher than a year ago; the FEd’s inflation target is 2% Motivating factor: Chair of the Federal Reserve, Janet Yellen, thinks unemployment is below the natural…… Continue reading US Federal Reserve rates
https://www.rba.gov.au/publications/bulletin/2015/jun/pdf/bu-0615-2.pdf stronger growth in labour productivity has worked to contain growth in labour costs Declining wage growth reflects spare capacity in the labour market, a decline in inflation expectations, a lower terms of trade, and the need for the real exchange rate to adjust to improve international competitiveness. Decline in ToT and fall in mining…… Continue reading Why Is Wage Growth So Low?
http://www.rba.gov.au/monetary-policy/rba-board-minutes/2017/2017-04-04.html International economic conditions Global economic conditions have improved over 2017 Growth in industrial production has increased Business conditions in manufacturing and services sectors at high levels Significant increase in the growth of global merchandise trade volumes, driven by stronger demand from east Asia and the US Merchandise imports to some emerging markets has stopped…… Continue reading Summary of the April RBA monetary policy meeting