What could happen in a US-China “tech cold war”?

2019/02/21

Summary

Our experts explain how continued trade tensions between the US and China could escalate to a full-blown “tech cold war”, forcing the rest of the world to choose sides. Supply chains could be disrupted, but several countries could benefit from new partnerships and production lines.

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Active is: Analysing macro trends

To gauge an economy’s health, watch the “financial cycle”

2019/02/28

Summary

A relatively new metric called the financial cycle can help tell investors more about an economy’s medium-term strength than the business cycle. The financial cycle can illuminate risks worth taking or avoiding, helping investors be more selective and active at a time when passively accepting risk may be detrimental.

Key takeaways

  • One measure of an economy’s health is the “financial cycle”, a metric developed after the financial crisis; we find it to be particularly useful today, when it’s critical for investors to be selective and manage risk actively
  • When financial cycles expand, house prices and private-sector debt have tended to increase, and recessions appeared to be less likely, less deep and less long
  • Our research shows that when the financial cycle was near its peak in a particular country, it historically had a 2/3 probability of facing a financial crisis
  • Monitoring where economies are in the financial cycle can help investors decide which risks are worth taking – a crucial benefit at times like these, when taking no risk may be the biggest risk to a portfolio