PGIM Fixed Income

GLOBAL MACRO MATTERS

PGIM Fixed Income’s thought leadership series, Global Macro Matters, provides a global perspective on GDP, inflation, sovereign developments, and Central Bank actions to name a few. Authors of this series include Nathan Sheets PhD., Chief Economist and Head of Global Macroeconomic Research along with other leading economists on Nathan’s team.

The Outlook for the Trade War: Assessing President Trump’s Next Move

Nathan Sheets, PhD, Chief Economist and Head of Global Macroeconomic Research

With the trade negotiations between the United States and China appearing to gain traction, it’s useful to step back and consider the outlook and prospects for the trade war. What are the key factors shaping President Trump’s choice set? What are some possible outcomes for the year ahead? And what does it mean for markets? This paper includes our observations regarding President Trump’s incentives and some lessons that we have drawn from his actions over the past year.

Africa’s Rising External Debt, Part 1: A Tempest in a Teapot?

Giancarlo Perasso, Lead Economist CEEMA, Global Macroeconomic Research, and Elizabeth Doppelt, Analyst, Global Macroeconomic Research

The growth of government debt in Africa has accelerated in recent years, giving it renewed prominence in the debate amongst investors, international organizations, and policymakers. In this paper, PGIM Fixed Income analyzes Africa’s external debt and concludes that market chatter about a debt restructuring is premature, and African countries have a viable path forward.

The Economics of Global Aging: Gray Skies, Rays of Policy Hope?

The global economy is in the midst of an accelerating demographic transition, and the implications of this shift for macroeconomic performance and financial markets are sobering. In this paper, Nathan Sheets, PhD, and George Jiranek, look at how aging demographics tend to result in softer real GDP growth, higher public debt levels, and lower inflation. On balance, the implications for asset market performance are skewed toward lower sovereign yields and increased headwinds for risk assets. But such outcomes are not predetermined.

The Surprisingly Restrained U.S. Consumer: A Source of Stability for the Global Economy? 

Nathan Sheets, PhD, Chief Economist and Head of Global Macroeconomic Research, and George Jiranek, Analyst, Global Macroeconomic Research

With the recent 10-year anniversary of Lehman Brothers’ failure, it’s useful to step back and assess how the global economy and financial system are different than they were a decade ago. In this paper, we examine a difference that has powerful implications for economic performance. Specifically, one seismic shift since the crisis has been a sustained retrenchment by U.S. consumers. Many of the imbalances before the crisis have been reversed. We also document that in recent years the U.S. household saving rate has been higher than historical relationships suggest, and household indebtedness has been significantly lower.

The Fed’s Swap Lines During the Crisis: Lender of Last Resort on a Global Scale

Nathan Sheets, PhD, Chief Economist, and Head of Global Macroeconomic Research

A decade after the worst of the Global Financial Crisis (GFC), Nathan Sheets, PhD, former director of the Division of International Finance for the Federal Reserve Board, looks back at the instability of the global financial system and details the role of the Federal Reserve as the international lender of last resort.

Mexico's Peje-nomic Outlook

Francisco Campos-Ortiz, PhD., Lead Economist - Latin America, Global Macroeconomic Research

Mexico’s recent general election (held on July 1, 2018) yielded a landslide victory for left-wing populist candidate Andrés Manuel López Obrador (AMLO) and a substantial reshaping of Congress to the left. In this paper, PGIM Fixed Income discusses how Mexico’s relatively sound economic starting position, institutional safeguards, market discipline, and pragmatic approach to policymaking by the new administration will likely prevent any material deterioration of its macroeconomic fundamentals in the short term. The paper also analyzes how the cumulative impact of a series of microeconomic distortions that may be implemented over the tenure of the incoming government, along with persistent uncertainty, could potentially beset Mexico’s fundamentals over a longer-term horizon.

 

The U.S. Labor Productivity Puzzle 

Nathan Sheets, PhD, Chief Economist and Head of Global Macroeconomic Research, and George Jiranek, Analyst, Global Macroeconomic Research

One puzzling feature of the economic data in recent years has been a sharp slowdown in the pace of U.S. labor productivity growth. And what makes this recent drop in labor productivity growth so puzzling is the abundant evidence of rapidly proliferating technology. In this paper, we examine a number of hypotheses that have been put forward to explain the perplexing slowing of U.S. labor productivity, which undoubtedly has important international implications. 

 

How Clean is “Clean”? Greece is Aiming for a “Clean Exit” From Its Third Bailout

Jürgen Odenius, Economic Counsellor

In a follow up to the "From Greece to Bondholders with Love" white paper, Jürgen Odenius, Economic Counsellor, explores whether Greece can make a “clean exit” from its third and final bailout and the consequent impact on bondholders.

 

Trade Tensions—Still More Bark
Than Bite?

Nathan Sheets, PhD, Chief Economist and Head of Global Macroeconomic Research 

With the trade rhetoric between the United States and China heating up, we look at the steps the countries have taken thus far, the potential implications for the global economy, and three possible scenarios going forward.

What's Driving Global Inflation?

Nathan Sheets, PhD, Chief Economist and Head of Global Macroeconomic Research and George Jiranek, Analyst, Global Macroeconomic Research

Across the major advanced and emerging market economies, inflation has remained remarkably low and stable in the face of diverse economic conditions and shocks. In this paper, we look more deeply at the global inflation process and assess some of the underlying factors that have influenced its recent performance.

Following in Japan's Footsteps: Have the U.S. and Euro Area Seen a “Lost Decade”?

Nathan Sheets PhD., Chief Economist and Head of Global Macroeconomic Research and George Jiranek, Analyst, Global Macroeconomic Research 

When the Japanese financial bubble burst in the early 1990s, the resulting developments looked idiosyncratic and unusual to analysts elsewhere in the world. Now, more than 25 years after the bursting of the bubble, the Japanese experience looks much less idiosyncratic. The U.S. and Europe, in the aftermath of the global financial crisis, seem to be experiencing many of the same headwinds that Japan did two decades ago. In our comparison of the experiences of these three major economies, we draw some conclusions about what may lie in store for the U.S. and euro area economies.

 

From Greece to Bondholders with Love

Jürgen Odenius, Managing Director, Economic Counsellor

Greece’s ability to potentially exit its bailout program in the summer of 2018 is a nod to both the progress made during early reviews of the ESM-financed adjustment program and that the political interests of all parties are aligned, for once. As a result, bondholders are likely to benefit from the establishment of a cash buffer that could meet the government’s financing needs for the foreseeable future.

What's Up With Global Inflation?

Nathan Sheets PhD., Chief Economist and Head of Global Macroeconomic Research

In the first of a series, author Nathan Sheets, PhD outlines a compelling case for inflation expectations to be low, stable, and well anchored. This means that investors have good empirical reasons both for requiring low inflation compensation for holding bonds and for demanding relatively small compensation for inflation risk.