Market Musings 020325:
Chartstorm (end-month)
So apologies this week, I have been working on a follow-up to my article last week about how to invest using an ETF-based system for my friend Tony.
But I haven’t finished the work yet, so I will write the article (part 2) next week.
In the meantime, here are some interesting charts and my conclusions…
Podcast this week:
German elections: implications for the economy and markets (click link to listen)
Stephan Kemper, Chief Investment Strategist, and Guy Ertz, Deputy Global Chief Investment Officer, discuss the impact of the German elections from a macroeconomic perspective and the implications for the markets..
Short report (1):
Frequently asked questions: February 2025 (click link to read)
1. Can the eurozone improve economic growth through key reforms? We expect initiatives in the coming months to improve the economy, particularly through deregulation. We continue to believe that investors are too pessimistic about the eurozone. High savings rates in the EU, moderating inflation and growing confidence in EU reforms and investment programmes, could drive real GDP growth close to 1%.
2. Are US and eurozone government debt burdens sustainable? There is no universal threshold for how much debt a country can sustain before facing sustainability concerns or the risk of default. In theory, there are three ways to reduce public debt: i) faster economic growth; ii) fiscal consolidation and iii) financial repression. At this stage, deficits and debt burdens do not pose a major source of stress.
3. What does the DeepSeek announcement mean for the AI investment theme? So far, there has been no suggestion of slower AI investment growth by the big 4 US hyperscalers. We expect the commoditisation of AI with the rapid introduction of competing generative AI models to lower entry costs for end users. This should accelerate widescale adoption of this technology in the wider economy. Economies could benefit from faster productivity growth with attendant disinflationary pressures on labour costs.
4. Should investors hold or take profits on gold? The gold price has risen to a new all-time-high, close to our USD 3000 target. Aside from ongoing buying by central banks (diversifying their reserves away from USD assets), the gold price is mainly supported by investors’ flight to safe havens due to high geopolitical uncertainties, mainly due to President…
