CBD Economic & Market Commentary

Researches about the market by our team

Welcome to the CBD Economy and Market Watch section. We will be sharing key economic news and updates across global markets, brought to you by Deepak Mehra, Chief Economist.

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Years

Economy & Market Watch -

Weekly Economy and Market Watch - 13 May 2024

The central bank of Sweden, Riksbank, cut rates last week even as inflation is running above target. It has acted in advance of any European Central Bank cuts to support a sputtering economy even though this can lead to another bout of currency weakness that in turn can fuel import prices. In March, the Swiss National Bank had proactively cut rate, ahead of ECB, to prevent further appreciation of the franc.

Sustainability

Weekly Economy and Market Watch - 6 May 2024

Last week’s data showed that the labor market is finally cooling down: nonfarm payrolls and wage growth came below expectations while unemployment was higher than anticipated. Earlier in the week, the March JOLTS report also showed the easing of the jobs market. Softening labor market will have a direct impact in reducing overall inflation levels and hence is taken positively by the markets.

Economy & Market Watch -

Weekly Economy and Market Watch - 29 April 2024

Equites ended a volatile week with a bang. Despite the fear of rates staying higher-forlonger, both S&P500 and Nasdaq clinched their best week since November. As equity markets remain forward looking, the rally seems to be broadening, which gives it more staying power. The overall earnings season has also been decent so far with 77% of the S&P500 index companies beating their earnings estimates.

Weekly Economy and Market Watch - 22 April 2024

The coming week is likely to provide further cues on the outlook for interest rates and the markets. The first estimate of the US Q1 GDP will be released on Thursday, April 25th . And on Friday April 26th the Personal Consumption Expenditure (PCE) data, which is the Fed’s preferred gauge of underlying inflation. Any surprise to the upside in GDP or PCE index is likely to strengthen the Fed’s case for keeping the rates higher-for-longer.

Economy & Market Watch -
Sustainability

Weekly Economy & Market Watch - 11 March 2024

Data last week painted a mixed picture about the outlook for inflation. The Consumer Price Index and Producer Price Index for February came in above expectations and confirmed the resilience of inflationary pressures. However, tepid retail sales growth in February, after a sharp drop in January, and weaker consumer sentiments reading suggested the economy is slowing down. This dichotomy is turning out to be challenging for policy makers and investors.

Weekly Economy & Market Watch - 04 March 2024

The US January Core PCE (personal consumption expenditure), the Fed’s preferred measure of inflation came in line with consensus forecast, but it was the biggest month-on-month rise since January last year. On the other hand, consumer confidence inched lower in February while ISM manufacturing PMI dipped further into contraction territory with employment and new orders indices edging lower.

Sustainability

Weekly Economy and Market Watch - 1 April 2024

The Federal Reserve’s preferred measure of underlying inflation, the Core Personal Consumption Expenditure (PCE) cooled in February after a very hot reading in January. The year-on-year data remained flat over the last month. Commenting on the data Fed Chair Jerome Powell said “pretty much in line with our expectations” but reiterated that the central bank is in no rush to cut rates

Weekly Economy and Market Watch - 25 March 2024

The strong economic data in the US masks a weakening consumer. The small top-end ‘Taylor Swift Economy’ has large, accumulated savings and investment gains and hence continue to splurge on recreation, tourism and of course $7,000 Taylor Swift tickets but the large majority who are in the ‘Average Joe Economy’ have run out of savings and raking up higher credit card debt and delinquencies while job openings are falling, and layoffs are rising.

Economy & Market Watch -

Economy & Market Watch - February 2024

The 5 pillars of the UAE economy in 2024
The UAE economy has displayed exceptional resilience in the face of rising interest rates. Growth in the population, booming tourism, a buoyant real estate market, surging non-oil economy and strong fiscal position of the government have been the drivers of the UAE’s economic strength in 2023. In this month’s report we will explore the potential of these five pillars of strength for the year ahead and assess the risks to our outlook.

Economy & Market Watch -

Economy & Market Watch - January 2024

The onset of Covid-19 in March 2020 resulted in a global health crisis and plunged the world into extraordinary times. The simultaneous collapse of demand and supply wreaked havoc for the global economy. Policy makers responded with all their might using unconventional tools which then resulted in imbalances across national accounts, capital markets and households. Nearly four years since the outbreak of the pandemic, in 2024, the extraordinary times are over and the world is finally returning to normalcy. Here are the 7 themes that investors must consider for 2024.

Economy & Market Watch -

Economy & Market Watch – December 2023

Wrapping up 2023: A year of many surprises

As the year comes to an end, we assess the significant changes in the economic and market outlook from the beginning of the year till now. Outcomes have been quite the opposite of what was expected, whether it was the outlook for the US or Chinese economy, or the prospects for equities and bonds.

Economy & Market Watch -

Economy & Market Watch – November 2023

At peak rates?

To curb runaway inflation, the US Federal Reserve along with all the major central banks have increased interest rates to historic levels at an aggressive pace while also reducing their balance sheets but the economy, especially in the US, has been surprisingly resilient, underpinned by a strong consumer. It is a sort of a tug of war between the resolute Federal Reserve on one end and the resilient economy on the other. So far in this contest, the economy seems to have an upper hand; however, recent data points to signs of upcoming weaknesses. Investors are trying to evaluate if the Fed will increase rates again and when is it likely to cut them.

Economy & Market Watch -

Economy & Market Watch – October 2023

Assessing the Path Ahead

The market’s assessment of interest rates has undergone numerous changes during the year. From projecting first rate cuts in June to no rate cuts in the year, the market is now considering the latest projections from the US Fed that keeps the door open for another rate hike before the end of the year. With the resolution of major supply side issues and cooling off food and energy prices, the easy part of the battle against inflation is now behind us. The path from here onwards up to the final target of 2% inflation will be more unpredictable as some factors continue to support consumer spending while others create tighter financial conditions. The path forward may be more volatile as rates may stay higher for longer and policy makers become more data dependent.

Economy & Market Watch -

Economy & Market Watch – September 2023

Higher for Longer...

Inflation data in the US continues to head in the right direction but economic growth remains surprisingly strong despite the onslaught of sharply higher interest rates. However, this means the Federal Reserve has not finished its job yet and interest rates are likely to stay higher for longer. Only a disorderly market.

Economy & Market Watch -

Economy & Market Watch – August 2023

Heading for the Goldilocks Zone!

Central banks in developed markets continue to tighten whereas the economies continued to be resilient. At the beginning of the year, it was a foregone conclusion that consumers and corporates will not be able to withstand the onslaught of the historically sharp increase of interest rates; but both have held up surprisingly well. Now there is a growing belief that central banks can manage a ‘soft landing’ with weaker grow

Economy & Market Watch -

Economy & Market Watch – July 2023

Higher Rates, Slowing Economic Activity

Persistent inflationary pressures are forcing central banks to stay hawkish even as economic activity continues to slow down. Markets are repricing further rate hikes in the coming months while pushing back any expectations for rate cuts any time soon. Interestingly, equity markets seem to be unfazed by this hawkishness and worsening economic outlook. Meanwhile, bond markets continue to point towards an impending recession.

Economy & Market Watch -

Economy & Market Watch – June 2023

Slower Road to Normalization

Central banks across the developed markets increased interest rates in May as inflation remains far above their target levels. Mixed data and statements from various central bank officials kept the debate about the future of monetary policy alive.

Economy & Market Watch -

Economy & Market Watch – May 2023

Who is right: Equities, Bonds or the Fed?

US economic data released in April has given mixed signals about the taming of inflation: there have been many signs of a slowdown in economic activity yet inflation remains far in excess of the target and certain elements of inflation remain sticky and resilient. Central banks now face a complex trade-off between further tightening the policy to control inflation versus pushing the economy into a bad recession. Analysts, investors and even central bank officials seem to be divided on their outlooks. As a result, signals coming from equity markets, bonds and the Fed are quite at odds with each other.

 

Economy & Market Watch -

Economy & Market Watch – April 2023

Central banks back to fighting inflation

The month of March was characterized by an extreme level of volatility in the bonds market due to banking crises across both sides of the Atlantic and surprisingly sanguine and calm equity markets. Having ringfenced the banking crises with a firm resolve, central banks across the developed markets brought their focus back to their number one battle: to bring inflation back to their target levels

Economy & Market Watch -

Economy & Market Watch – March 2023

Bumps along the way

Investors felt confident in January that the economy was slowing down sufficiently to encourage central banks to pause after a series of aggressive rate hikes, but a set of strong data in February has suddenly changed that view. Optimism that drove shares and bonds higher in January has flipped to worries about interest rates going higher and staying higher.

Economy & Market Watch -

Economy & Market Watch – February 2023

Aggressive interest rate hikes by central banks over the last 10 months is working its way through the system and having the desired effect of bringing down inflation and slowing down economic growth. Yet, the global economy is performing better than what was anticipated just six months ago. At the same time, Q4 2022 company earnings, released so far, continue to beat investor expectations. Along with other factors, financial conditions look less dire than feared and hence the markets have started the year on an optimistic note.

Economy & Market Watch -

CBD Macro Economic Outlook Event – 1 February 2023

  • Why are the interest rates going up?
  • How high will the rates go?
  • When will they get cut?
  • What is the outlook for equities, bonds, USD and oil?
  • What is the outlook for the UAE?
  • Where should I invest now?

Economy & Market Watch – January 2023

While the year started with a firm belief that pandemic-era supply side constraints were easing and inflation would be transitory, the actual situation turned out to be completely different. Inflation in much of the developed world started rising rapidly and touched levels last seen four decades ago. The two main drivers were the war in Ukraine that has inflated energy and food prices and tightness in the labor market that drove unemployment levels to 50-year lows and wages growth to historic highs. With inflation looking well entrenched, rather than transitory, central banks pivoted from their dovish stance at the beginning of the year to aggressively hike interest rates to prevent inflation from spiraling out of control.

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