NEWSLETTER of June 27, 2025

The following content has been added at finexpert:

Amundi
MID-YEAR INVESTMENT OUTLOOK 2025
A rewiring of the global economy is forcing investors and policymakers to proceed with caution. Unpredictable policymaking is unhelpful for the economy and triggering big market swings. But there are hopeful signs too. Major economies have so far proved resilient. Also, while the US administration’s priorities were tariffs and security, planned tax cuts and deregulation may mitigate trade levies’ impact on growth. In Europe, Germany’s fiscal shift was a gamechanger. And there is a political consensus that the continent must act to ensure its international clout matches its economic heft. Meanwhile, the European Central Bank has more leeway than the Federal Reserve to support growth. Still, European actions must match the rhetoric. Moreover, not all countries can boost spending given investors are increasingly sensitive to rising global fiscal burdens. >more

BCG
RETHINKING THE RULES FOR GROWTH: GLOBAL WEALTH REPORT 2025
Global financial wealth reached $305 trillion in 2024, an all-time high. But the dynamics behind that growth are shifting—and the implications for firms are profound. Financial assets rose more than 8%, fueled by strong equity markets and favorable investor sentiment. Cross-border flows accelerated. North America and Asia-Pacific continued to be the fastest-growing regions. In many markets, wealth managers delivered solid results. Wealth continues to grow steadily. Sustaining that momentum is becoming more difficult, however. Net wealth—which comprises financial assets, real assets, and liabilities—grew just 4.4%, below the 5.1% average of the prior five years. Currency swings and inflation compressed returns, and geopolitical tensions are adding historic levels of uncertainty. More importantly, the sources of growth are shifting. >more

Oxford Institute for Energy Studies
CLOSING THE STRAIT OF HORMUZ: IMPACT ON THE GLOBAL GAS MARKET
While the closure of the Strait of Hormuz seems unlikely, despite Iran’s threats, especially for a prolonged period, the potential impact would be serious for the global gas market. Qatar and the UAE account for 20 percent of the global LNG supply, with 80 percent of their LNG exports going to Asian markets, with the balance going to Europe. A prolonged closure would lead to large falls in LNG supply to Europe, China, South Asia and Japan, Korea and Taiwan. Europe would be disproportionately affected in volume terms, with Europe losing LNG to the Asian markets. Gas demand in Europe, China and India, especially, would be significantly lower, with Europe and China also facing an inability to refill storage. The price shock of the loss of Middle East LNG is estimated to be similar to the price shock in 2022, following the Russian invasion of Ukraine, with European and Asian spot and hub prices approaching $30 per MMBTU – compared to the current 12-month TTF forward curve of some $13 to $14. >more

Institut für Makroökonomie und Konjunkturforschung
DEUTSCHE WIRTSCHAFT AUF ERHOLUNGSKURS - FISKALPOLITIK SETZT IMPULSE
The global economy is currently characterized by trade policy shocks and a high level of uncertainty. In the forecast period, global trade will only expand very modestly as a result of the weaker global economy and the existing trade conflicts. It will increase by 1.9% this year and by 2.1% next year. A moderate recovery is expected for the German economy in the forecast period. Strongly expanding private consumption will play a key role in this. Construction investment and investment in equipment will also make a greater contribution over the course of the year. These will gain momentum, not least due to expansive fiscal measures. On balance, foreign trade will have a negative impact on growth in both years. GDP will increase by an average of 0.2% in 2025, and by a much stronger 0.7% over the course of the year. The economic recovery will continue at a stronger pace next year. GDP will increase by 1.5% on average in 2026 and by 1.6% over the course of the year. >more

PUTTING COUNTRIES ON THE CAP? PASTORAL VISITS OF JOHN PAUL II AND INTERNATIONAL TRADE
Alexander A. Popov
2025
During his reign from 1979 to 2005, Pope John Paul II visited 129 countries, more than the 263 Popes before him combined. I document a significant increase in exports to trading partners with a relatively high share of Catholics following a Pastoral visit, leading to a non-negligible increase in aggregate exports. The biggest beneficiaries in terms of increased trade are visited countries that are at lower stages of economic development and have relatively few Catholics and weak trade links. The effect is absent for other prominent episodes, such as global sports events or visits by political dignitaries. >more

TARIFF WAR SHOCK AND THE CONVENIENCE YIELD OF US TREASURIES -A HEDGING PERSPECTIVE
Viral V. Acharya, and Toomas Laarits
2025
This note explains how the "tariff war" shock of early April 2025 affected the convenience yield of US Treasuries. Its erosion at the long end is consistent with a reduction in the safe-asset hedging property of long bonds, reflected in a rising stock-bond covariance computed using intraday data. Decomposing the Treasury yield into the risk-free rate, credit spread, and the convenience yield components reveals that it is covariance due to the convenience yield component that rose for long bonds. The same decomposition reveals that the short end of the Treasury curve continued to exhibit the safe-asset hedging property both due to a lowering of the (expected) risk-free rates as well as an increase in the convenience yield component. These effects are consistent with stagflation risk, withdrawal of safe-asset investors, rotation towards shorter-term Treasuries and gold, and unwinding of cash-futures basis trades. >more