Weekly Bulletin: Looking Through the Market Turmoil

The coronavirus outbreak is set to deliver a sharp and deep economic shock. Market moves are reminiscent of the 2008 crisis, but we don’t think this is a repeat. Stringent containment and social distancing policies will bring economic activity to a near standstill, but provided aggressive fiscal and monetary policy actions are taken to bridge businesses and households through the shock, activity should return rapidly with little permanent economic damage.

Key points

  • It’s not 2008: A decisive and coordinated policy response should prevent the coronavirus shock from sparking a 2008-style crisis.
  • Diminished buffer: Government bonds have served their role as portfolio ballast in the risk selloff, but this role looks increasingly challenged by low yields.
  • Central banks: Monetary and fiscal actions to cushion the blow have begun, including the Fed cutting rates to near zero and announcing bond purchases.

The opinions expressed are as of March 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: US Payroll Report

Rick Rieder, BlackRock Chief Investment Officer of Global Fixed Income, on what the US payroll report says about the economy

“There are certain payroll reports where we might think about repositioning portfolios, but this is one isn’t one of them. There are other things in the world that are more important. What we need to know is whether we are continuing the current growth path. In that respect, these numbers are impressive.”

“The Federal Reserve can, to some extent, sit back and put its feet up. There’s nothing to do from the central bank’s perspective. The US economy is operating extremely well and is in good shape. It is a notable contrast to the German data that also emerged this week, which saw the greatest rate of descent in their economy since 2009.”

Week Past

British Retail Consortium – There was scant evidence of the so-called ‘Boris bounce’ in the British Retail Consortium’s retail sales figures for January. Total sales rose 0.4%, but this was driven by retailers adding space.1

UK economic data – The UK economy saw no growth in the final three months of 2019, even though more recent surveys have suggested an improvement in economic conditions. Office for National Statistics (ONS) figures for the fourth quarter showed manufacturing contracted for the third quarter in a row and the service sector also slowed. The economy grew by 1.4% overall in 2019.2

US Institute for Supply Management (ISM) non-manufacturing PMI (January) – The ISM index rose to 55.5 in January, higher than expected, reflecting a more optimistic outlook for manufacturing after the US/China trade deal. It was the highest level since August.3

US initial jobless claims – The number of Americans claiming unemployment benefit dropped to a nine-month low, with initial claims dropping to 202,000. This continues to be a strong support for the US economy.4

Coronavirus – The virus continued to spread across the world, with more than 40,000 people infected in China alone and cases reported in many other countries. It continues to hit Chinese stock markets, the travel sector and energy funds.5

Week Ahead

US inflation (January) – US consumer prices are slated to rise 2.4% year on year and 0.1% month on month, while ‘core’ inflation is due to rise 2.2% year on year and 0.2% month on month.6

Eurozone Gross Domestic Product (GDP) (Q4, preliminary) – Growth continues to be sluggish across the Eurozone, in spite of some revival in the German economy. Year on year growth is expected to be 1%, while quarter on quarter growth is expected to have slowed to 0.1%.6

US retail sales (January) – The US consumer continues to be the engine of the economy, as employment and wages grow. Retail sales are expected to rise 0.3% month on month.6

UK wages and unemployment – UK jobs growth and wages have continued to defy a weakening economy. Economists are expecting wage growth to continue to outpace inflation.7


  1. British retailers yet to benefit from ‘Boris bounce’, says BRC, The Guardian, February 2020
  2. UK economy saw zero growth at the end of 2019, BBC, February 2020
  3. US services sector growth picks up in January, CNBC, February 2020
  4. US weekly jobless claims drop to a 9-month low, CNBC, February 2020
  5. Coronavirus mapped: the latest figures as the outbreak spreads, Financial Times, February 2020
  6. IG Index, week ahead, January 2020
  7. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Thawing Trade Tensions

Elga Bartsch, Head of Macro Research for the BlackRock Investment Institute

“The base case is that growth is going to pick up and edge a little higher this year and that means that the recovery remains intact. There are a number of reasons why growth is going to get better: The first is that thawing of trade tensions between the US and China, but also the material easing in financial conditions seen last year on the back of the pivot towards easing by central banks around the world.”

“In terms of the macroeconomic outlook there are two main risk scenarios to consider. One could be that we are too cautious on the recovery gaining momentum in 2020, so that growth is materially stronger than expected and without any material pick-up in inflation pressures. This would be a ‘Goldilocks’ scenario.”

“The second risk is that we are too optimistic on growth and instead, we’re overlooking material inflation risks that could be building, especially cost pressures. That could end up in a mild stagflation. This usually happens if you have a deterioration on the supply side of the economy, which coincides with a material slowdown in productivity growth.”

Week Past

Brexit – the UK formally left the European Union on 31 January, triggering a war of words. Prime Minister Boris Johnson said there was no need for the UK to follow EU rules on trade.1

Bank of England rate decision and inflation report – Although there had been talk of a potential interest rate cut, the Bank of England left rates unchanged at 0.75%. However, the Monetary Policy Committee (MPC) estimated Britain’s economy would only grow at 1.1% on average over the next three years.2

Federal Reserve rate decision – The US Federal Reserve officials left interest rates unchanged at 1.5% to 1.75% at their first meeting of 2020. Jerome Powell said the economy was solid, particularly jobs growth and consumer confidence, but global risks remain.3

US and Eurozone gross domestic product (GDP) – Eurozone growth was just 0.1% in the October to December quarter over the previous quarter, confounding expectations of a bounce-back.4

US growth – US growth was in line with market expectations for the fourth quarter, at 2.1%, but behind White House expectations. Full year growth of 2.3% was below 2.9% in 2018 and 2.4% in 2017.5

Chinese manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) (January) – China’s manufacturing sector showed signs of life, with the PMI index hitting 50 for January, in line with expectations. However, the statistics do not consider the impact of the coronavirus.6

Week Ahead

UK budget – The Chancellor Sajid Javid has said the new Budget will set out “ambitious plans to unleash Britain’s potential, level up across the UK and usher in a decade of renewal”, but he faces some tough choices as lower growth gives him less room for manoeuvre.7,8

British Retail Consortium – The Christmas period was tough for retailers, but retail sales are expected to be stronger in January, up 1.7% year on year.9

UK data – UK services and industrial production, plus fourth quarter economic growth statistics come out this week, giving a snapshot of the strength of the UK economy and whether the post-election bounce can be sustained.10

US Institute for Supply Management (ISM) non-manufacturing PMI (January) – the index is expected to rise to 55.1 from 55, reflecting a more optimistic outlook after the US/China trade deal.9

US initial jobless claims – claims are expected to rise to 219,000 from 216,000.9


  1. Brexit: Boris Johnson says ‘no need’ for UK to follow EU rules on trade, BBC, February 2020
  2. Bank of England holds rates but cuts growth forecast, Financial Times, February 2020
  3. Fed Leaves Interest Rates Unchanged, New York Times, February 2020
  4. Eurozone growth slows sharply as French and Italian economies shrink, the Guardian, February 2020
  5. Fourth-quarter GDP rose only 2.1% and full-year 2019 posts slowest growth in three years at 2.3%, CNBC, February 2020
  6. China says its manufacturing PMI came in at 50.0 for January, as expected, CNBC, February 2020
  7. Chancellor launches Budget process to usher in ‘decade of renewal’, UK Government, January 2020
  8. Sajid Javid’s surplus goal at risk as UK finances face £12bn black hole, Financial Times, February 2020
  9. IG Index, week ahead, January 2020
  10. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Low Interest Rates for a Little While Longer…

Marilyn Watson, head of the BlackRock Global Fundamental Bond Product Strategy Team

“Financial repression has not ended. We expect to see further loosening on the fiscal side in the UK and elsewhere. We’re not going to see interest rates rise anywhere soon in developed markets. With continued low rates, it will still be very hard for investors to get the income they’re looking for.”

“For investors, the solution to this environment is to be targeted and diversified, but also to take as flexible an approach as possible, retaining the ability to protect and hedge portfolios and to be very nimble in terms of changing overall allocation. Investors also need to be realistic about the returns they can achieve.”

“Some of the valuations in fixed income look stretched. Some of the investment grade bonds, for example, are relatively expensive, plus treasuries, government bonds, bunds and gilts. There’s not a bubble that’s going to burst, but it is harder and harder to find genuine sources of value.”

Week Past

European Central Bank (ECB) interest rate decision – The ECB decided unanimously to keep interest rates at their current level of -0.5%, in line with market expectations. The central bank also announced a strategic review into whether its inflation target is still appropriate. [1]

German flash manufacturing and services Purchasing Managers Indices (PMI) (January) – The German economy rebounded at its fastest pace in five months at the start of 2020, suggesting the “storm clouds may be starting to clear”. The composite index rose to 51.1 from 50.2 at the end of 2019. [2]

UK flash manufacturing and services PMI (January) – UK manufacturing and services saw a rebound following the UK General Election. The composite PMI rose to a 16-month high of 52.4, up from 49.3 in December. [3]

US flash manufacturing and services PMI (January) – US manufacturing continued its weakness in January, with the IHS Markit flash PMI falling to 51.7 in January from 52.4 in the previous month. However, services continue to strengthen. [4]

Week Ahead

Brexit – the UK formally leaves the European Union on 31 January, allowing trade negotiations to begin. [5]

Bank of England rate decision and inflation report – Although there has been talk of a potential interest rate cut ahead of Brexit, market expectations now point towards no change. [5]

Federal Reserve rate decision – the Federal Reserve has clearly signalled that rates are on hold at 1.75% in the short-term with many not expecting a rate rise until 2020 and beyond. [5]

US and Eurozone gross domestic product (GDP) – Early readings are expected for US and Eurozone economic growth. The market is expecting US growth to be stable at 2.1%, while Eurozone growth is slated to fall from 1.2% to 1%. [5]

Chinese manufacturing and non-manufacturing PMI (January) – Manufacturing has been expected to rise from 50.2 to 51.1, but data may be disrupted by the Coronavirus outbreak. [6]


  1. ECB holds rates as strategic review gets underway, CNBC, January 2020
  2. German economy picks up pace while Eurozone growth stagnates, City AM, January 2020
  3. UK firms see boost as uncertainty eases, survey says, BBC, January 2020
  4. US manufacturing PMI at 3-month low in January, MarketWatch, January 2020
  5. IG Index, week ahead, January 2020
  6. FX Street, Economic Calendar, January 2020

The opinions expressed are as of February 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.

Weekly Bulletin: Climate Change is Investment Risk

Philipp Hildebrand, BlackRock Vice Chairman, speaking at Davos on climate change

“Clients have been telling us for a while that this is an important issue. They’ve recognised that climate risk is investment risk. Sustainability risks are, ultimately, investment risks, whether that is due to physical events such as flooding or regulatory developments. Clients have understood this and they’ve been calling on us to help them get ahead of these trends…We’re at the very beginning of a significant shift in finance and we hope, as a large firm, that we can make a difference, that we can be an accelerator, an amplifier.”

“For company CEOs, this is an opportunity and a risk, like all big changes. With few exceptions, it’s very clear that almost all CEOs recognise that this is a reality and are asking how they adapt their business model to the changes. In some cases, it can be a great opportunity, in others it will be a challenge. There are very few people who feel they can simply ignore this.”

“We want to be much more transparent in how we engage with the companies and in how we vote. Also, we’ve made it clear we expect companies to live up to disclosure responsibilities, making sure that the market has the information it needs to judge where companies are with regard to climate risk.”

“In the very long-term there may be a watering-down of the return potential you have in sustainability, but this is a major shift that’s just about to happen. This is no different to the shifts we’ve seen related to the baby boom, for example. This is a fundamental reshaping of finance that will entail significant reallocation of capital and relative price changes.”

Week Past

UK inflation (December) – UK inflation fell to its lowest level in more than three years in December. Consumer prices were 1.3% higher than a year ago. Expectations had been for a rise of 1.5%, in line with the previous two months. [1]

UK retail sales (December) – Shoppers stayed cautious over the Christmas period, with retail sales volumes falling by 0.6% from November. This was the fifth month in a row without growth, with food stores hit hard. [2]

UK wages and employment – The UK labour market continued to show strength in the three months to November, adding 208,000 jobs compared to the previous three months. Average weekly earnings, including bonuses, rose 3.2% year on year, unchanged from the previous three months. [3]

US-China trade deal – The US and China signed their much-awaited ‘phase one’ trade deal. Critics said the deal lacked substance, but the deal offers a way for both sides to claim victory and has proved supportive for markets. [4]

China Gross Domestic Product (GDP) – China’s economy grew 6.1% in 2019 as the trade war with the US and domestic pressures took toll. This was the lowest economic reading since 1990, as weaker consumer spending, rising unemployment and problems in the financial system weighed on growth. [5]

US manufacturing production (December) – December manufacturing data confirmed that the sector was in a mild recession for all of 2019, shrinking 1.3%. It was the worst year for manufacturing since 2015. [6]

Week Ahead

Interest rate decisions – rate decisions are expected from the European Central Bank and Bank of Japan. In both cases, interest rates are expected to remain on hold, but markets will be looking out for any change in tone from the central banks. [7]

German flash manufacturing and services Purchasing Managers Indices (PMI) (January) – manufacturing data is expected to show some recovery from a dismal 2019 in German manufacturing, rising from 43.7 to 44.0. However, services are predicted to fall from 52.9 to 52.5. [7]

UK flash manufacturing and services PMI (January) – UK manufacturing is expected to rise from 47.5 to 48.4, as the US/China trade deal eases pressure on global trade. Services are expected to fall from 50 to 49.5.

US flash manufacturing and services PMI (January) – In the US, manufacturing is expected to fall from 52.4 to 52, with services predicted to fall from 52.8 to 51.7.


  1. UK inflation slips to three-year low, FT, January 2020
  2. Retail sales fall sharply in December, BBC, January 2020
  3. UK jobs market strengthens ahead of Bank of England rate decision, FT, January 2020
  4. US-China trade deal: Winners and losers, BBC, January 2020
  5. China’s GDP grows at slowest pace in 29 years, FT, January 2020
  6. US manufacturing was in a mild recession during 2019, a sore spot for the economy, Washington Post, January 2020
  7. IG Index, week ahead, January 2020

The opinions expressed are as of January 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.