Weekly Intelligence Report – Sectors and the Fed, Japan and corporate inversions

12 Apr 2016

Although the recent flurry of Federal Reserve speeches since the FOMC meeting in March have been interpreted somewhat dovishly, particularly Chair Yellen’s address on Friday, we remain mindful that our most likely, or central scenario, is still that of a slow normalisation of growth, inflation and interest rates. In the first of our pieces, Daniel Morris takes a timely look at equity sector, overall market and currency performance during past periods of rising rates. Historical experience allows us to draw stronger conclusions about relative sector performance than overall market or currency performance.

In the second of our articles, Joost van Leenders turns the spotlight on Abenomics. Despite being the biggest experiment in monetary expansion in modern history, Abenomics’s “first arrow” has failed to deliver the expected increase in inflation or inflation expectations. With headline inflation returning to zero, and inflation expectations falling, Joost poses the “what next?” question. Lastly, we turn our attention to the world of corporate mergers and tax inversion. Recent changes in corporate tax treatment by the US Treasury, working in conjunction with the Internal Revenue Service, have potentially significant implications for M & A activity, for investment bank revenue and profitability, and for the effective tax rates faced by corporates, as Eric McLaughlin explains in the last of our articles for this edition of the Weekly Intelligence Report.

I hope that this week’s edition provides thought-provoking reading.

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