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[What ‘Moderately Loose’ Monetary Policy Means for China’s Stock Market] 1. China’s most powerful political body, the Politburo, has shifted its monetary policy stance from “prudent” to “moderately loose” in 2025, suggesting more aggressive rate cuts to counter Trump tariffs are ahead. 2. Historical data shows two major negative return phases for the SSE Composite Index when monetary policies were tight: 1993-1997 (Moderately Tight) and 2008 (Tight). 3. During other periods, including “prudent” phases, the index generally delivered positive returns. The “moderately loose” phase from 2008 to 2010, though short-lived, saw the SSE Composite rise by approximately 65%. 4. Beyond monetary policy, the Politburo has also emphasized fiscal measures and boosting consumption. Phrases like “forcefully lift consumption” and “more proactive” fiscal stimulus suggest a willingness to tolerate higher deficits and increased government spending. 5. Although these announcements are directional rather than concrete, they signal that rejuvenating the economy has become China’s top priority and thus increases the likelihood of positive returns for the Chinese stock market in 2025. For more insights, join my Telegram: https://t.me/realDrWealth

Governments play a pivotal role in shaping market dynamics through various mechanisms. Their influence spans across monetary policy, regulatory frameworks, and industry-specific regulations, each contributing to the stability and direction of economic activities. Here's a closer look at the key areas where governments impact markets: Monetary Policy and Currency Regulation: - Central banks, acting on behalf of governments, manage monetary policy, which includes setting interest rates and controlling money supply. - By adjusting these levers, governments can influence inflation, unemployment, and overall economic growth. Regulatory Environment: - Governments establish rules and regulations that govern how businesses operate within different industries. - These regulations ensure fair competition, protect consumers, and maintain market integrity. Fiscal Policies: - Through taxation and government spending, fiscal policies can stimulate or slow down economic activity. - Strategic investments in infrastructure, education, and technology can drive long-term economic growth. Trade Policies: - Tariffs, trade agreements, and export-import regulations are tools used to manage international trade relationships. - These policies can protect domestic industries and promote exports. Economic Stability: - Governments intervene during economic downturns through stimulus packages and other measures to stabilize the economy. - Such interventions help prevent market failures and support recovery. Understanding the intricate relationship between government actions and market outcomes is crucial for investors, businesses, and policymakers alike.

🌎 This week our economists look at the return of Trump and the implications of a Republican sweep scenario: 1. Inflation, GDP and Fed Funds outlook: President Trump’s victory at the US elections and the likely full Republican control of the Congress do not change our forecasts for US GDP much but we now expect inflation to rise to 2.9% and 3.4% in 2025 and 2026. Fed Funds rates are expected to be stuck at 4.0% in 2025 and 4.25% in 2026. 2. Fiscal policy: We expect that President Trump will push through a fiscal package of around 0.5% of GDP by the end of 2025 (net of savings), as well as the full renewal of the Tax Cuts and Jobs Act of 2017, bringing the total fiscal package to 1.6% of GDP. 3. Trade policy: President Trump is expected to increase US import tariffs as early as Q2 2025 through an executive order, initially raising tariffs to 25% for Chinese imports and to 5% for imports from the rest of the world, excluding Canada, Mexico and critical goods. We estimate USD135bn worth of global exports would be at risk, equal to 4% of the projected global export gains for 2025-26. 4. Capital markets: The overall market response was more muted than in 2016 as much of the "Trump trade" had already been priced. Looking ahead, we expect US long-term interest rates to remain high, influenced by rising inflation expectations, less monetary easing and persistent fiscal deficits, and a small boost for US risky assets in 2024. Read the full report here: https://ow.ly/vaq750U24vj #Economics #Economy #USElections

🌎 This week our economists look at the return of Trump and the implications of a Republican sweep scenario: 1. Inflation, GDP and Fed Funds outlook: President Trump’s victory at the US elections and the likely full Republican control of the Congress do not change our forecasts for US GDP much but we now expect inflation to rise to 2.9% and 3.4% in 2025 and 2026. Fed Funds rates are expected to be stuck at 4.0% in 2025 and 4.25% in 2026. 2. Fiscal policy: We expect that President Trump will push through a fiscal package of around 0.5% of GDP by the end of 2025 (net of savings), as well as the full renewal of the Tax Cuts and Jobs Act of 2017, bringing the total fiscal package to 1.6% of GDP. 3. Trade policy: President Trump is expected to increase US import tariffs as early as Q2 2025 through an executive order, initially raising tariffs to 25% for Chinese imports and to 5% for imports from the rest of the world, excluding Canada, Mexico and critical goods. We estimate USD135bn worth of global exports would be at risk, equal to 4% of the projected global export gains for 2025-26. 4. Capital markets: The overall market response was more muted than in 2016 as much of the "Trump trade" had already been priced. Looking ahead, we expect US long-term interest rates to remain high, influenced by rising inflation expectations, less monetary easing and persistent fiscal deficits, and a small boost for US risky assets in 2024. Read the full report here: https://ow.ly/vaq750U24vj #Economics #Economy #USElections

🌎 This week our economists look at the return of Trump and the implications of a Republican sweep scenario: 1. Inflation, GDP and Fed Funds outlook: President Trump’s victory at the US elections and the likely full Republican control of the Congress do not change our forecasts for US GDP much but we now expect inflation to rise to 2.9% and 3.4% in 2025 and 2026. Fed Funds rates are expected to be stuck at 4.0% in 2025 and 4.25% in 2026. 2. Fiscal policy: We expect that President Trump will push through a fiscal package of around 0.5% of GDP by the end of 2025 (net of savings), as well as the full renewal of the Tax Cuts and Jobs Act of 2017, bringing the total fiscal package to 1.6% of GDP. 3. Trade policy: President Trump is expected to increase US import tariffs as early as Q2 2025 through an executive order, initially raising tariffs to 25% for Chinese imports and to 5% for imports from the rest of the world, excluding Canada, Mexico and critical goods. We estimate USD135bn worth of global exports would be at risk, equal to 4% of the projected global export gains for 2025-26. 4. Capital markets: The overall market response was more muted than in 2016 as much of the "Trump trade" had already been priced. Looking ahead, we expect US long-term interest rates to remain high, influenced by rising inflation expectations, less monetary easing and persistent fiscal deficits, and a small boost for US risky assets in 2024. Read the full report here: https://lnkd.in/ejKMpy3Q #Economics #Economy #USElections

🌎 This week our economists look at the return of Trump and the implications of a Republican sweep scenario: 1. Inflation, GDP and Fed Funds outlook: President Trump’s victory at the US elections and the likely full Republican control of the Congress do not change our forecasts for US GDP much but we now expect inflation to rise to 2.9% and 3.4% in 2025 and 2026. Fed Funds rates are expected to be stuck at 4.0% in 2025 and 4.25% in 2026. 2. Fiscal policy: We expect that President Trump will push through a fiscal package of around 0.5% of GDP by the end of 2025 (net of savings), as well as the full renewal of the Tax Cuts and Jobs Act of 2017, bringing the total fiscal package to 1.6% of GDP. 3. Trade policy: President Trump is expected to increase US import tariffs as early as Q2 2025 through an executive order, initially raising tariffs to 25% for Chinese imports and to 5% for imports from the rest of the world, excluding Canada, Mexico and critical goods. We estimate USD135bn worth of global exports would be at risk, equal to 4% of the projected global export gains for 2025-26. 4. Capital markets: The overall market response was more muted than in 2016 as much of the "Trump trade" had already been priced. Looking ahead, we expect US long-term interest rates to remain high, influenced by rising inflation expectations, less monetary easing and persistent fiscal deficits, and a small boost for US risky assets in 2024. Read the full report here: https://ow.ly/vaq750U24vj #Economics #Economy #USElections

With a new President-elect, our sessions focused on the outlook for trade policy at the investor seminar at the IMF/World Bank Meetings were particularly insightful, with expectations for US exceptionalism to become even more dominant. The direction of US trade policy and the consequences of tariffs were debated in a lively panel featuring Georgetown’s Marc Busch, University of Maryland’s Michael Faulkender CFR’s Brad Setser and former Ambassador to Mexico Earl Anthony (Tony) Wayne . Second and third order effects from tariffs were discussed, with debate on the consequences to the growth, inflation and FX outlook. The IMF’s Petya Koeva Brooks presented the latest IMF 2024 growth outlook in a fireside chat with Bruce Kasman, led by the upgrade of the US to 2.8%, while Euro area growth was downgraded to 0.8%, but highlighted that the balance of risks have now shifted to the downside. Good progress has been made on reducing inflation in many countries, though core inflation remains closer to 3% than 2% in many economies. Bill Dudley and John Lipsky discussed the Fed’s upcoming evaluation of its policy framework, and deliberated on whether the flexible average inflation targeting framework is clearly calibrated to fighting the previous war. Yet it is clear that maintaining a low inflation target is important, although a tight inflation range between 1.5% to 2.5% may be preferable in maintaining inflation at precisely 2%. There is consensus on structural issues weighing on Europe in the panel discussion that featured Bruegel/PIIE’s Nicolas Veron Chairman of the Economic and Financial Committee of the EU, Tuomas Saarenheimo, and J.P. Morgan’s Vittorio Grilli. Negative sentiment has been exacerbated by recent political outcomes, and fundamentals are perhaps not quite so bad. Yet there was acknowledgement that defining the resilience of Europe as averting recession is not good enough. Thank you to Scott Hamilton, Michael Feroli, Johannes Banner and Ed Franklin for introducing, hosting and moderating the sessions.

What Would The Stock Market, Tariffs, Inflation And The Tech Sector Look Like Under A Second Term For Donald Trump? If Donald Trump were to become president again, it could have significant implications for the stock market and trade policies, particularly regarding China. Based on his first term and recent statements, we can expect a renewal of his tough stance on China, potentially including even higher tariffs on Chinese goods—up to 60%. Read today's newsletter to learn who will be the winners and losers. https://lnkd.in/e_JEBADG

🌍 Indosuez Global Outlook 2025: A Transforming World This edition, “A Transforming World”, explores the evolving macroeconomic landscape, including AI’s impact on growth, setting equilibrium interest rates, shifts away from the US dollar in currency markets, China’s economic rebalancing, and the energy transition towards electrification. We examine these captivating themes to provide valuable insights. #Indosuez #Macroeconomics #AI #Rates #Forex #Energy