Head of Macroeconomic Research
Summary: Following the improvement of the ZEW poll of financial market experts last week and the Sentix index early this month, all the IFO indicators have increased in June on the back of fewer restrictions on economic activity. Both investors and business leaders have the same judgement regarding the economic situation in Germany, which doesn't happen as often as you might think.
The IFO business climate index is out at 86.2 in June vs 85.0 expected and prior 79.5. The assessment of the current situation has also improved at 81.3 vs 84.0 expected and prior 78.9. Looking at business expectations, we also notice a strong increase to 91.4 vs 87.0 expected and prior 80.1. The rebound in all the three main indicators was largely anticipated by market participants due to the lifting of lockdown measures in Germany, which explains the rather muted market reaction to the release. Though social distancing remains in place and that isolated clusters are emerging here and there, notably in Lower Saxony and in the town of Rheda-Wiedenbrueck where more than 1,500 workers have been infected, the health crisis seems contained and well-handled by the authorities which tends to have a positive effect on businesses’ assessment of the current situation and of expectations. It is also likely that the rapid policy response to the economic crisis, via a €130 billion stimulus package, played a key role in the current improvement.
In the below chart, we have plotted the business situation and the business expectation indices since 2005 to create the IFO clock. It is composed of four quadrants: upturn (on the top left), boom (on the top right), downturn (on the bottom right) and recession (on the bottom left). We observe a major and expected improvement compared with last month, but it remains deeply in recession territory, at a level worse than in 2010. In other words, this is no time for celebration, there is still a long way to go before confidence is back.
A new fragmented world order can render some of today's infrastructure obselete, but it also calls for massive new investments across the globe, which requires a new set of strategic and tactical investment strategies.
Steen Jakobsen,
Chief Investment Officer
As globalisation turns to fragmentation, China seems set on playing a role in the global economy, while simultaneously working towards proofing its own economic situation from external shocks and crises.
Redmond Wong,
Market Strategist
The recent bank runs and ensuing challenges are reminicent of something we've seen before. Will it end like the S&L crises of 1986 and 1995?
Chris Dembik,
Head of Macroeconomic Research
Equity markets need to recalibrate to another - fragmented - global world. What's your view on equities in this market - are they going up or down?
Peter Garnry,
Head of Equity Strategy
With every development comes new opportunites, some of which could be in India. Have you considered the country as a part of your diversification strategy?
Charu Chanana,
Market Strategist
A collar is an option strategy that allows some protection while maintaining some upside potential. What investment would you like to use a collar strategy for?
Hans Oudshoorn,
Trainer Academy
There are arguments to be made for many commodities to have upside. Which are you paying the most attention to this quarter?
Ole S. Hansen,
Head of Commodity Strategy
In a very challenging macro environment, which currencies do you think will come out on top?
John J. Hardy,
Head of FX Strategy
