We have noted a multiplication of fraud attempts in which the name ODDO BHF is likely to be used. This is particularly the case for Portuguese-language websites that usurp ODDO BHF SE identity to invite you to make a payment. We would like to inform you that these websites are not legitimate and have been created by fraudsters. We therefore urge you to be extremely vigilant.
If you have any doubts about the authenticity of any documents or solicitations, please do not hesitate to contact your usual contacts directly or to contact us at +33 1 44 51 85 00.
The U.S. economy currently experiences a “sugar rush”. Despite scientific skepticism, there is a widespread belief that eating sweets leads to short-lived hyperactivity. A phenomenon often referred to as Sugar Rush. Several economists have used this expression lately to describe the economic situation in the United States where some short-lived hyperactivity is expected in the coming months. The main drivers to this hyperactivity are the USD 1.9 trillion Biden stimulus program and the forced savings during the Covid-19 crisis (USD 1.85 trillion) which are going to flow back in the economy when it reopens. Economic growth in Europe will also accelerate, but at a slower pace as the more successful vaccination policy in the U.S. allows a faster reopening of the economy there than in Europe. Recently, the FED has increased its projections and now believes that the U.S. real GDP will grow by 6.5% in 2021 (December 2020 projection: 4.2%), by 3.3% in 2022 and by 2.2% in 2023.
Our clients ask us how inflation will develop under this scenario. We believe that inflation in the U.S will increase sharply in 2021 but will then fall in 2022 and beyond (see Exhibit 1). Don’t forget, it is a short-lived Sugar Rush. As a result of higher inflation, the yield curve is steepening. We increased our yield expectations for 10-year interest rates in the U.S. from 1.8% to 2.0% at the end of 2021.
The risks to these forecasts are clearly on the upside as the ECB and the FED have both announced in March 2021 that they will continue their expansionary monetary policies. The ECB has declared on March 11 to conduct asset purchases at a significant higher pace, and the FED stated on March 17, that it will continue to increase its holdings of securities by USD 120 billion per month despite an improved growth outlook and falling unemployment rates. The consensus among (most) politicians is that it is better to do too much than too little, a lesson learned after the global financial crisis in 2008. Larry Summers expects that the economy possibly overheats due to expansionary monetary and fiscal policies and that inflation could increase to levels not seen in a generation. While this is not our main forecast, the risk to real GDP growth, inflation and interest rates is clearly on the upside and not the downside.
The implications of these forecasts to our investment strategy are as follows:
¹) The duration risk describes the risk of price losses on bonds due to interest rate rises.
²) Source: Refinitiv Datastream, as of 15.03.2021; 1y. forward contracts: forward contracts with a one-year term (example: 3Y1Y = forward contract starting in three years with a term of one year
This document has been prepared by ODDO BHF for information purposes only. It does not create any obligations on the part of ODDO BHF. The opinions expressed in this document correspond to the market expectations of ODDO BHF at the time of publication. They may change according to market conditions and ODDO BHF cannot be held contractually responsible for them. Before investing in any asset class, it is strongly recommended that potential investors make detailed enquiries about the risks to which these asset classes are exposed, in particular the risk of capital loss.
Our news
Three British economists—Paul Marsh and Mike Staunton of the London Business School, and Elroy Dimson from Cambridge University—have embarked on a meticulous endeavour: they have traced 35 stock markets around the world as far back as possible to test a core theoretical question of investment. Are equities truly superior to all other asset classes over the long term?
Economic crises leave a legacy of high public debt. Expansion phases should be used as an opportunity by governments to reduce their debt and rebuild some headroom in their public finances. This is easier said than done. Let’s look at what happened after the last two major crises.
We must confess that we have a strategic "bias" in favor of the US market. The past 15 years proves us quite right. Since the end of the 2007-2008 Financial Crisis, Europe has outperformed for only 27 months, or just over 2 years. This structural outperformance of the US vs. Europe is mainly explained by a more robust EPS dynamic in the US.