G-SIBI's (Global Systemically Important Banks):
A positive year for 2018. $11 trillion in assets need to be sold compared with approximately $876 billion in equity that needs to be added to the list of 29 G-SIBI’s. This is a reduction of $76 billion from a year ago. For another year in a row, France and Japan will need to make the most headway in adding capital to their banks in the years to come.
Capital needed per country:
France, Japan, Canada, Spain, and Switzerland have the most to consider in how they raise capital in relation to their economic footprint. Expect to see equity to increase on company balance sheets during 2019-2021.
historical interest rates after a crisis:
A bottoming formation in the US 10 yr. Government Bond is following prior patterns seen both in the U.S. and Japan following past crises. Two Hundred and Fifty years of interest rate data confirms this theory, as bottoms usually take years to form versus tops that are sharp in nature when they peak. Current Taylor Rule indicates that rates should be 3.36%.
Real Rates of Return:
Long term Real Rates of Return (10yr. Treasury Bond - Inflation) have been generally declining for 39 years. Currently the United States Real Rate of Return is .60%. Globally that number is -.46%.
This chart is one of the best indicators of where valuations in the equity market present themselves. Central Bank money printing (currently spearheaded by the ECB) is having a dramatic cause and effect relationship with all global asset classes. Shaw Group expects another $1 trillion will be printed in the next 4 years. This could increase total market of all assets by ~4%.
The chart below hit a high of 1.512% in 2000. The current indicator stands at 1.359%.
The World bank gdp annual growth data:
Long-Term Inflation data dating back from 1774
Two Hundred and Forty-Four years of data show that historic inflation averages 1.65%. 30 year cycles appear present. This would indicate that the bottom of our declining rate of inflation will not subside until 2018. 2025 is when estimated inflation trends cross and would thus imply a structural change in trend.
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We share our insight regarding global capital markets and investment themes via proprietary analysis.