Thoughts on European Macro Q4

I woke up one morning a fortnight ago with the word “Deflation” ringing in my ears wondering what that might mean for our portfolio? When the figures subsequently came in for the Eurozone at -0.3%, markets seemed to shrug it off. But negative CPI is actually a very bad thing if prices are falling, because people defer purchases, which lowers the overall level of demand, which results in falling production with a knock-on effect on employment, resulting in a downward deflationary spiral with potentially lost decades for stocks, as in the case of Japan. The range within the reported Eurozone CPI was wide, with Greece, the worst affected at -2.3% and France at 0.0%, the best. Germany was -0.4% and Italy -1.0%. Oil was a big negative contributor, for obvious Covid 19 related reasons. Clothing was negative, food positive but services were barely positive.


To continue reading click below



Thoughts in Europen Macro Q4
.pdf
Download PDF • 317KB