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Our outlook for US inflation and growth has brightened considerably since the start of 2018, so we have lifted our targets for both US Treasury yields and TIPS-based breakeven inflation rates. Here, we review the factors we see as contributing to the rise in US inflation and we look at the potential monetary policy response from the Federal Reserve (Fed).
Equity markets correct in FebruaryEquity markets recorded steep declines in several consecutive trading sessions, before beginning to recover erratically on 9 February. The MSCI AC World index in US dollar terms dropped by 7.6% on the month to 8 February, ending the month down by 4.4% and bringing a 15-month winning streak to an end. The MSCI Emerging Markets index fell by slightly more (4.7% in USD terms) as Asian markets swooned.
The US dollar is currently down by nearly 10% on a nominal, trade-weighted basis since the end of 2016, which has contributed to rising US company earnings. Earnings-per-share (EPS) estimates have also been boosted more recently by the anticipated benefits of US tax cuts (see exhibit 1).
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Investments in the aforementioned fund are subject to market fluctuation and risks inherent in investing in securities. The value of investments and the revenue they generate can increase or decrease and it is possible that investors will not recover their initial investment. Source: BNP Paribas Asset Management Holding.