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Spotlight

Argentina: 5 Key Questions

By Cathy Hepworth, CFA, Co-Head of the Emerging Markets Debt Team and Francisco Campos-Ortiz, PhD, Latin America Economist, Macroeconomic Research Team

The unexpected and shocking defeat of President Macri and his center-right party in the Argentine primaries on August 11 has led to a significant repricing of Argentina assets. In addition to providing revised macro forecasts given our base case that the Fernandez ticket wins the October election, we provide perspective on 5 key questions regarding how events may unfold in Argentina going forward.

Turkey—A Short-Term Reprieve Amidst Persistent Uncertainties

Jürgen Odenius, PhD, Principal, Economic Counsellor, Global Macroeconomic Research Team, and James Hyde, Principal, Credit Analyst, European Corporate Bond Research Team

Turkey’s economic crisis erupted one year ago, and we recently returned to the country to gauge the outlook going forward. While Turkey’s large external financing requirements remain its key vulnerability, funding flows should continue normalizing. In this context, it is noteworthy that political uncertainty appears to have “troughed.” Growth apparently remains the overarching priority of economic policy, and any policy missteps risk draining the rather limited (unencumbered) official FX reserves. However, in such a scenario, the authorities could turn to the IMF as a last resort. On balance, we remain cautiously constructive on Turkey’s outlook.

 

Recent Thought Leadership

The Fed's About-Face Complete Amid Dissent

Ellen Gaske, PhD, CFA, Principal and Lead Economist, G10 Economies, Global Macroeconomic Research Team, and Robert Tipp, CFA, Managing Director, Chief Investment Strategist and Head of Global Bonds

The markets were disappointed with the Fed’s 25 bp cut. Short-term yields rose amid reduced expectations for cuts. However, long rates declined, suggesting that the less-dovish-than-expected Fed could dampen inflation and growth over the long run.

The Next Chapter in the U.S.-China Trade War

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

With President Trump and President Xi agreeing to restart trade negotiations, our baseline remains that the both face compelling incentives to resolve the conflict. Trump needs a strong economy and a rising stock market leading up to the presidential election in November 2020. Xi has the dual of objectives of hitting his 6.0-6.5% growth target and avoiding further accumulation of debt and leverage in the economy. Given this backdrop, we see four scenarios as to how the trade talks might proceed over the next year.

Weekly View: Factors Affecting U.S. Rates; Argentina's Surprise

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