PRESS CENTRE

Economic Outlook: Will the debt matter? Neil Williams examines the impact that various pandemic-related stimulus packages have had on both global government debt and the efficacy of monetary and fiscal tools available to policy-makers. 23/09/2020 - Neil Williams

How markets are missing the biggest populist movement of all 09/01/2019 - Saker Nusseibeh, CBE

They Walk Among Us – The Extended Cycle Of Zombie Firms 31/10/2018 - Eoin Murray

How markets are missing the biggest populist movement of all 29/10/2018 - Saker Nusseibeh, CBE

Silvia Dall’Angelo, Senior Economist, responds to UK budget For all the resounding announcements, catchy slogans and jokes, today’s Budget amounted to little in practical terms. Chancellor Philip Hammond announced “a Budget for Britain’s future” and reiterated that, after almost a decade of spending cuts, fiscal austerity was “coming to an end”, as also suggested by the Prime Minister during the Tory party conference early this month. Alas, it is not happening now, it is only vaguely defined in practical terms, and it is conditional on a good Brexit deal. 29/10/2018 - Silvia Dall’Angelo

Escalating trade war is biggest risk for world economy The trade tariffs – and corresponding retaliatory measures – implemented are so far limited. In total, the value of affected trade now amounts to about $150bn globally, or 0.8% of overall world exports. However, adding up all the measures currently under discussion and assuming impacted countries retaliate commensurately, the amount of targeted trade could quickly rise to more than $1tn, or 6% of global exports. In her latest Ahead of the Curve, Silvia Dall’Angelo, Senior Economist at Hermes Investment Management, argues an escalation of protectionist measures evolving into a trade war could represent the biggest challenge to the world economy. 13/08/2018 - Silvia Dall’Angelo

Not tight, just less loose... In his latest quarterly Economic Outlook, Neil Williams, Group Chief Economist at Hermes Investment Management, points out that ten years after the first glimpse of the financial crisis, and major economies have finally recouped their GDP (Chart 1, below). Even Japan, whose deflationary crisis originated two decades earlier and Italy, hamstrung by the euro, are back to ‘square one’. Arguably, most of the macro effects from the crisis were not registered till 2008, which then triggered a round of monetary stimulus – conventional and unorthodox – unparalleled since the 1930s. 05/09/2017 - Neil Williams

The wrong sort of inflation... As the world wakes up to the new reality of extremely slow growth, there seems little doubt the returns investors became accustomed to during the ‘Great Moderation’ are a thing of the past, according to Saker Nusseibeh, Chief Executive of Hermes Investment Management. We believe investors will need to adjust expectations downwards across almost all asset classes in the future, with real returns of 4-5% not unimaginable. Real yields on government debt may struggle to exceed 1-2% at the same time. While investors can receive a premium for corporate instruments, these are likely to experience rising default levels. 07/06/2017 - Neil Williams

Tightening by doing nothing... In his May issue of Ahead of the Curve, Neil Williams, Group Chief Economist at Hermes Investment Management, discusses his view that while markets are still taking a ‘glass-half-full view’ of the world, protectionism is the new risk emerging. This he argues, suggests we face a year of two halves – where stimulus-euphoria gradually gives way to stagflation concern. Helpfully, though, the trade-off is that central bank policy rates stay lower than many expect. Amid this, the US Federal Reserve remains the test case for whether central banks can ever ‘normalise’ policy interest rates. We expect it to try, but fail – peaking out at a far lower policy rate (1¼-1½%) than in past US recoveries. 04/05/2017 - Neil Williams

Should investors be scared of heights? Equities are scaling new peaks, driven by what appears to be a market-friendly first-round result in the French presidential elections and Trump’s renewed talk of tax cuts, but Eoin Murray, Head of Investment at Hermes Investment Management, warns that investors should look through the near-universal positivity for signs of risk. In the US, for instance, the tech-toned Nasdaq breached 6,000 for the first time, while the Dow Jones retook the lofty 21,000 barrier it originally claimed this March. But can risk assets sustain a rapid ascent to greater heights? 04/05/2017 - Eoin Murray

Beggar thy neighbour... In his latest quarterly Economic Outlook, Neil Williams, Group Chief Economist at Hermes Investment Management, believes that markets are taking more than a ‘glass half full’ view of the macro outlook, with little consideration of the new risk emerging. In the short term, this makes sense, he says, as speculation, rightly, that major economies will open the fiscal box is sparking ‘reflation trades’. 02/03/2017

Euro-zone – time for Plan B... The ECB’s decision prior to Christmas to extend QE for another nine months to December 2017, though ‘taper’ it from this April, does not herald an early tightening of economic policy, according to Group Chief Economist Neil Williams in his January Ahead of the Curve. Quite the opposite in fact, with the key deposit rate likely to stay negative in 2017, and the fiscal side activated. 2017’s extra QE easily surpasses the combined GDPs of Greece & Portugal... Tapering means more QE. By tapering its monthly asset purchases from €80bn to €60bn, it’s still looking to inject an extra €540bn in QE. This easily surpasses the combined GDPs of Greece and Portugal. Central banks can now buy bonds that yield lower than the -0.4% deposit rate. However, the nuance, is Mr Draghi’s growing encouragement of governments to take the baton back from the ECB. A lesson from Japan is that QE provides cash to lend, but cannot force consumers and firms to borrow. The euro-zone thus looks halfway down the Japan route. It too may be running unconventionally loose monetary policy (QE and negative rates) to get its currency down, but has yet to let go of the fiscal reins. 05/01/2017 - Neil Williams

More - not less – QE means this is not tightening Some today will be disappointed that Mr Draghi is planning to taper the ECB’s QE from next April. But Neil Williams, Group Chief Economist at Hermes Investment Management, believes they shouldn’t be. First, tapering means more, not less, QE, and even though he’s closing the tap a notch in April, the ECB’s liquidity sink is still filling up. By tapering its monthly asset purchases from €80bn down to €60bn, he is still looking to inject an extra €540bn in QE. To put this into perspective, this easily surpasses in equivalent terms, the combined GDPs of Greece and Portugal for example. 08/12/2016 - Neil Williams

Six beliefs driving our macro outlook for 2017... In his latest quarterly Economic Outlook, Looking into 2017, Neil Williams, Group Chief Economist at Hermes Investment Management, sets out the six core beliefs that lie behind his macro view of 2017. After a year of political surprises, we could see tectonic shifts in economic policy. Speculation, rightly, that major economies will open their fiscal box is currently causing ‘reflation trades’ to puff up growth assets, raise inflation expectations, and make the 30-year bull-run in government bonds look even staler. 07/12/2016 - Neil Williams