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In-depth focus notes

From time to time, we conduct one-off studies to deepen our understanding of certain topics that we believe have a bearing on our investments. Below we provide examples of such studies. Further studies are included in the Archive.


  • Mounting wage pressures in China

    May 2017
    In recent decades, Chinese economic growth has been fuelled on the supply side by a demographic dividend coupled with internal migration. Demographics are now starting to restrict growth potential, at the same time as the economy is around its Lewis turning point. This suggests that, absent enabling structural reforms that foster enhanced productivity growth, wage and unit labour cost pressures could mount. If so, China's moderating influence on global inflation may wane in future. download »
  • Fringe benefits of quantitative easing

    Apr 2016
    Through QE, the central banks in the US, UK, Japan, euro area and Sweden have expanded their government debt holdings, partly to address the 2008/09 recession and partly to combat low inflation. While they are holding only a small share of government debt at present, central banks are more than fully funding deficits in some cases. As a fringe benefit of QE, were purchases maintained in Japan and in the euro area, debt sustainability would improve sharply in less than a decade. download »
  • The Swiss current account and CHF

    Aug 2015
    Despite the sharp appreciation in its currency since 2011, Switzerland has continued to run sizeable current account surpluses, which casts some doubt on whether the franc is in fact overvalued. We find that there are indeed some genuine forces at play that suggest a lower current account sensitivity to the currency than in the past, and at least some rise in “fair value” for CHF. This causes us to limit the size of our short position in the Swiss franc from what it would otherwise be. download »
  • Demographics and the labour market

    Oct 2014
    Trend employment, and thereby GDP, stand to be weighed down increasingly by slower population growth and ageing, and pasts offsets from rising female participation may diminish. download »
  • Exchange rates and the terms of trade

    Jan 2020
    Forecasting exchange rates is notoriously difficult and many theories and empirical tests have yielded largely unsatisfactory results. Yet, the terms of trade alone appear to correlate remarkably well with the real exchange rate, across the G10. This has implications for assessing currency valuations and can help with constructing our FX portfolio. Currently, the two currencies with the greatest scope for FX moves to restore alignment to the terms of trade are found to be AUD and SEK. download »
  • Italy's fiscal position - a surmountable challenge

    Feb 2012
    Italy’s high public debt makes improving its public finances difficult, but it appears achievable. Relative to other economies Italy’s vulnerabilities near term are considerable, but its longer-term prospects are better. download »