eric chaney's blue book, june 17, 2014

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Eric Chaney

Chief Economist, AXA Group

Head of Research, AXA IM [email protected]

June 2014 (Update 17 June, 2014)

Tracking the global recovery 2014 growth forecast cut to 3.3%

US = leading; China = insurance against downside

Emerging markets: regaining market confidence

Central banks: Fed-ECB ever more dovish

Euro area: risk of persistent low inflation

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(logo placé à 2/3X du bord; X =

logotype) 2 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM 2

The global macro outlook

Global GDP forecast trimmed from 3.5 to ≈ 3.3% ; US GDP from 2.8 to 2.2%

► Global trade and the US are recovering from 1Q dip, not fast enough to plug the gap

► China has taken an insurance on GDP growth, with a 7.0% floor

► The emerging markets cycle is lagging behind but should benefit from US growth

Fed: perceived as more dovish under Yellen than under Bernanke

► The new Chair is focused on the labour market, more than on financial stability

► Some FOMC members are ready to let inflation overshoot after having undershot

► Vice chair Stanley Fisher may take a more conservative view

The recovery in Europe is too sluggish to fully offset deflationist forces

► Weak and uneven, the cyclical recovery is nevertheless supportive for equities

► The ECB has delivered an easing package; targeted liquidity injection is the new plan

► Absent QE (unlikely), bank restructuring is a necessary condition to the recovery

Emerging markets: net capital inflows and market sentiment again positive

► Tapering being fully priced, the Fed’s dovish stance is –again- positive for EMs

► Country-specific political risks made things worse. They look less acute now

► The good news: emerging markets have proved resilient to capital flows gyrations

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logotype) 3 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM

Central banks: a tentative calendar for exits

Bank of England: end 2014 / early 2015

Federal Reserve: end 2015 / early 2016

European Central Bank: 2017

Bank of Japan: 2018

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Main macro risks

Short term (3 to 6M):

Markets challenging the Fed on its very dovish policy stance

Yellen’s Fed has become ever more dovish. A rise in inflation may question this stance

Political instability in the Middle East sending crude oil prices through the roof

Two conflicts are yet unresolved: Israelis vs. Palestinians and Sunnis vs. Shias

Political instability in Europe caused by votes on independence or EU membership

The rise in eurosceptic votes shows that tensions within the EU are building up

Policy mistakes by Chinese policymakers causing an unexpected hard landing

China has to reform on several fronts while keeping GDP growth above 7%. Challenging!

Medium to long term:

Very low inflation becoming entrenched in the euro area if bank restructuring is too slow

Following a large debt build-up, excessively low inflation would raise solvency issues

Further French / German growth and fiscal divergence, markets testing France

France is now moving toward supply side reforms – at a snail pace

Ill designed ‘exit strategies’ by big central banks (Fed/BoJ/BoE)

Inflating monetary bases to prevent deflation was easy. The opposite won’t be

Mismanagement of the rise of China as regional superpower

From India to Japan through Philippines and Vietnam, worries are building up

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What equity markets say

Equities: supported by risk appetite and liquidity

Source: MSCI, AXA IM Research

Equity markets have shrugged off concerns

about Ukraine, China and oil (so far)

Performances are comparable across regions

The MSCI index has crossed the trend +1s.d.

line but valuations are not stretched (yet) and

risk appetite is strong

The trend growth rate of real total return is in

line with the post-1971 era (2.4%)

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2.3Log (MSCI - World Equity Index*, inflation adjusted), 1=1970

*: Total return

Red line: real trend (non recursive HP filter, lambda = 10^11)

Dotted lines: +/- 1 standard deviation of

deviation from mean

Deflator interpolated from US PCE deflator

As of: 17/06/2014

World US EMU (€) EU ($) EM ($)

-40.3% -37.1% -44.3% -46.1% -53.2% Through 2008

30.8% 27.1% 28.7% 36.8% 78.7% Through 2009

12.3% 15.4% 3.3% 4.5% 19.2% Through 2010

-5.0% 2.0% -14.1% -10.5% -18.2% Through 2011

16.2% 16.1% 18.0% 18.7% 18.5% Through 2012

27.4% 32.6% 24.4% 26.0% -2.3% Through 2013

5.5% 6.0% 8.1% 6.2% 5.4% Since 01 Jan 2014

3.2% 3.9% 3.8% 1.4% 1.7% Last four weeks

MSCI total return indexes (source MSCI)

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9MSCI World Equity

Index*Annualized real rate of return

*: Total returnAnnualized rate of growth of smoothed (non recursive HP filter, lambda = 10^11) inflation-adjusted total return index.Deflator interpolated from US PCE deflator

Long-term average

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What our models say

Equities: Risk Appetite Barometer positive

Our in-house ‘Risk Appetite Barometer’ has increased further in June

Its cyclical component (US and € Surprise Gaps) is now firmly in positive territory, led by the US. Also:

* The 3M momentum component is rising and is now above zero

* The average pair-wise correlation of US stocks is low, a sign that herd behaviour is not a risk

* The low vs. high credit quality spread is record high: investors see a recession as highly improbable

Rescaled weighted

average of four scores

(AXA IM surprise

gaps, Corporate bond

spread of spreads,

Average pair-wise

correlation of stocks &

3-month equity price

momentum)

Cyclical risk: first

score /

Systematic risk:

weighted average of

the last three scores

Sources:

Bloomberg,

Datastream,

Reference

document:

Market sentiment

indicators: less is

more – Mathieu

L’Hoir – AXA IM

Research

– May 24th 2012

-1.0

-0.5

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0.5

1.0

-1.0

-0.5

0.0

0.5

1.0

2009 2010 2011 2012 2013 2014

Risk appetite

Risk aversion

Weekly Risk Appetite Barometer (RAB)

Systematic risk appetite

Cyclical risk appetite

Risk Appetite Barometer (RAB)

Latest Data:

17/06/2014

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What bond markets say

Bonds boosted by dovish talk; € decoupling from US

Markets see the first Fed hike in mid/late 2015, followed by 25bps hikes every two other FOMC meetings

The ECB rate cuts and announced TLTRO had a small negative impact on Bund yields. Depending on the

speed of the restructuring of the banking system, the ECB may have to keep rate at zero until 2017

The long term view: we are at the beginning of a secular bear market for US Treasuries. Once QE is over,

markets will reprice the term and inflation premia and reconsider the timing of rate hikes as time passes

In the euro area, a Japanese scenario is a possibility, although not the main case

Source: Datastream, AXA IM Research

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2012

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2015

USA

Germany

US trend

Japan

Main benchmark 10Y bonds, annual yields%

All time lows:US Treasuries: 1.40% on 24 July, 2012Bunds: 1.15% on 31 May, 2012JGBs: 0.43% on 13 June, 2003

Latest data:

17 June 2014

0.0

0.5

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1.0

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2.5

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3.5

4.0

USA Germany

US trend Japan

%

First hint at

'imminent' tapering

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What bond markets say

Forward curves: hammered by Yellen and Draghi

UST curve: Since end 2013, medium-long-term forwards have fallen by up to 70bps, while shorter forwards

were stable, as if markets were pricing slower long term growth or a lower duration risk premium

The first speeches of Fed chair Janet Yellen have confirmed that she is on the dovish side re interest

rate policy. Yet, markets are trying to assess FOMC decisions, not only the chair’s views

German curve: over the same period, the whole forward curve has eased. Markets have postponed by one

year their rate hike expectations. The term premium is still in negative territory: for the markets, a Japanese

scenario is not excluded. The ECB may have to diverge from the Fed over 2015-16


-100

-50

0

50

100

150

200

-100

-50

0

50

100

150

200

Average (1999-2012) TP for UST = 70bps

US Treasuries

German Bunds

A proxy for the term premium on 10Y UST and Bunds(basis points, estimated from zero-coupon curves)

The term premium is from the Kim-Wright (Fed) model for UST

The proxy is a linear function of the 1Y in 7Y forward rate0.0

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1Y ...in 1Y ...in 2Y ...in 3Y ...in 4Y ...in 5Y ...in 6Y ...in 7Y ...in 8Y ...in 9Y

Euro curve, 13-Jun-14

US curve, 13-Jun-14

US curve, 27-Dec-13

Euro curve, 27-Dec-13

US and Germany1Y forward rates derived from zero coupon curves%

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What real bond markets say

Inflation futures: stabilisation

Medium term (5Y) expectations have stabilised in the four constituencies we are tracking, with Japan and the euro area at the low end, hovering around 1.2 / 1.3%

Longer term (5Y in 5Y) expectations are broadly stable in the US, between 2.75 and 3.0%, and in the UK, around 3.5%. They have declined to 2.0% in the €-area . If extended, this downward trend would challenge the ability of the ECB to “anchor long-term inflation expectations”.

With Fed, BoE and BoJ sailing in unchartered waters, investors may ask for a higher long term inflation premium, at some point in time. The longer exit strategies are postponed, the higher the premium.


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UK 5Y in 5Y US 5Y in 5Y

EUR 5Y in 5Y Japan 5Y in 5Y

Inflation swaps (breakevens), 5Y in 5Y

Latest data: 09/06/2014

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UK 5Y US 5Y

EUR 5Y Japan 5Y

Inflation swaps (breakevens), 5Y

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What commodities markets say

Commodities: Chaos in Iraq may cause a spike

Base metal prices have been declining on trend since early 2011. The deceleration of headline growth in China together with sluggish recoveries in developed economies and ‘end of QE’ headwinds for emerging economies may fuel this downward trend further. Yet, at the moment, they are stable.

Crude oil (Brent): while markets shrugged off tensions between Russia and the West (use of strategic reserves by the US?), they are sensitive to the situation in Iraq. Long forwards indicate convergence toward $100/bbl, once stamped ‘fair price’ by Saudi Arabia...

Source: Datastream AXA IM Research

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5,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Brent, US$/bblHWWA Index

Brent

LME index

LME Metal Index

HWWA Agriculture Raw Materials Index -RHS

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120

130

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130

Crude oil futures, ICE Brent contracts

Spot Dec-2014

Dec-2016 Dec-2018

US$/bl

Latest data point: 18/06/2014

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What FX markets say

Currencies: € overvalued vs. ¥ and $, £ rising fast

Since Mr. Abe election, the JPY has fallen by 30%

BoJ is likely to expand further its monetary base

The ECB is concerned by deflation. Followed by action, it

is EUR negative. If action fails, deflation is EUR positive

Fed tapering should be USD positive. A stronger than

expected recovery in the US too.

Source: Federal reserve, ECB, BoE, AXA IM Research

Nominal TW rate: Deviation from average(1999-2013)As of: UK £ Euro JP Yen Swiss franc US $

17/06/2014 -6.2% 2.6% -4.3% 24.5% -9.5%

US$ real bilateral rate: Deviation from(1999-2012)As of: US$ /Yen US$ / CHF US$ / UK£ US$ / €

17/06/2014 17% -18% -6% -9%

Euro real bilateral rate: Deviation from(1999-2012)As of: € / Yen € / US$ € / UK £ € / CHF

17/06/2014 31% 10% 3% -7%

JPY real bilateral rate: Deviation from(1999-2012)As of: JPY/€ JPY/US$ JPY/UK£ JPY/ CHF

17/06/2014 -25% -17% -23% -30%

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2007 2008 2009 2010 2011 2012 2013 2014

CHF

JPY

EUR

USD

GBP

Average1999-2012

Nominal trade-weighted exchange rate, 100 = average (99-13)

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2006 2007 2008 2009 2010 2011 2012 2013 2014

€ / JPY € / US$ € / UK £ € / CHF

Euro bilateral exchange rate, adjusted for inflation trends100 = average (99-13)

Str

ong

euro

We

ak e

uro

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What real economic indicators say

Global trade: roller coaster, weak underlying trend

Global trade contracted in 1Q 2014 (-0.8%Q), a payback after an abnormally strong 4Q 2013 (+1.6%Q)

The underlying trend (circa 3.5%) is significantly weaker than the longer trend (6%)

Unless trade sharply rebounds in the coming months, global trade growth will disappoint again in 2014

The elasticity of trade relatively to global growth has fallen from 1.5 before the global financial crisis to

less than 1 since then. Is this a structural shift? If it is, growth models based on exports would suffer.

Source: CPB, AXA IM Research

Volume

Price in US$

Glo

ba

l T

rad

e

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105

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145

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105

125

145

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Volumes (s.a.)

Prices / unit values in US$

March 2014

-21%

100 = 2005

Global trade in US$, 2008/06 to 2009/04: -32.5%

-15%

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Inflation/deflation balance: deflation has an edge

Japan, the UK and a handful of emerging economies are operating above recent trends, by a small margin. China is close to potential, Brazil below trend.

Most of Europe is at or below trend, but the UK, which is now on a fast track

Short term, risks are still tilted toward disinflation

Bear in mind that the global component of inflation explains 70% of local inflation (*)


(*): More precisely, the share of inflation variance explained by a measure of global inflation is 71%, on

average, for Oecd economies. This share ranges from 60% for Germany to 68% for the US and 89% for

France. Source: Ciccarelli and Mojon, Global Inflation in The Review of Economics and Statistics, 2010.

Trend GDP is estimated with a non-recursive

HP filter, with lambda set at 10,000

(industrialised) or 5,000 (emerging)

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Japan

Hungary

Mala

ysia

UK

US

Denm

ark

Austr

alia

Canada

Indonesia

Germ

any

Turk

ey

Chin

a

Sw

eden

Kore

a

Rom

ania

Sw

itzerland

Chile

Mexic

o

Fra

nce

Belg

ium

Russia

*

Taiw

an

Arg

entina*

Italy

Pola

nd

India

Port

ugal

Irela

nd*

Spain

Bra

zil

Thailand

Neth

erlands

Gre

ece

Output Gaps, 1Q 2014 (* = 4Q 2013)

Actual minus trend GDP as % of trend GDP

Operating above trend Operating close to trend

Risk of deflationOperating below trend

1.0% < OG -1.0% < OG < 1.0%

-2.5% < OG < -1.0%

OG < -2.5%

-3.8

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Divergences within developed economies stabilised

Source: National Accounts, AXA IM Research

Since the bottom of the 2009 recession, recoveries in the developed world have been heterogeneous.

Canada, Switzerland and Sweden, all wide open economies, are doing better than others.

Among larger developed economies, the US is leading, followed by Germany. The UK is catching up

Japan has overtook France, where unemployment is still rising. Yet, mind the payback in 2Q

Along larger economies, Italy remains the most worrying case, with GDP still 9% below the 2008 peak

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110

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Canada US Germany

France Japan UK

Italy

Real GDP index100 = average 3 quarters around peak

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110

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Sweden

Switzerland

Belgium

Netherlands

Ireland

Spain

Portugal

Greece

Real GDP index100 = average 3 quarters around peak

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China: deceleration under control; PBC role critical

China’s GDP decelerated further in 1Q (1.4%Q vs. 1.7% in 4Q 2014), hit

by weak exports. Industrial production growth has landed just below 9%

Thanks to the targeted stimulus decided by the government, the 7.0%

floor for GDP looks credible. We have cut our 2014 forecast to 7.2%.

Financial jitters are likely, as PBC raises the ante to force banks to clean

their balance sheet. Yet, liquidity is controlled by PBC and a credit hard

landing is unlikely, in the short term at least

Car sales are growing robustly (16%Y on trend), testimony of a re-

balancing toward consumer demand.

Source: NBS, Datastream, AXA IM Research

50

100

200

50

100

200

2006 2007 2008 2009 2010 2011 2012 2013 2014

Smoothed series

Raw series

China: vehicles production (volume index - log scale)

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Real YoY

Real GDP quarterlyannualised (SAAR)

Trend growth (HP)

China - actual and trend real GDP growth

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25

35

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2006 2007 2008 2009 2010 2011 2012 2013 2014

China: NBS PMI and industrial value added 12M % change

PMI index

Long term relationship between growth and PMIOutput % = -28 + 0.8*PMIBreakeven around 35PMI at 50 consistent with circa 10% growth in the long run

IP growth, May 2014

PMI, April 2014

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Chinese exports fell from a cliff in February (-45% MoM), without any ‘economic’ rationale. Imports fell

much less (-22%), thus generating a trade deficit (=China exporting growth). Since then, exports have

recovered faster than imports; yet the current trend is puzzlingly flattish.

This is why a limited fiscal stimulus was decided, together with a cut in the reserve requirement rate

The message from the PBC was loud and clear: with financial liberalization coming, RMB/USD will no

more be a one-way bet. Note that the currency is now back on the 2.5% p.a. appreciation line.

Source: NBS, Datastream, AXA IM Research


China: sluggish exports, RMB stabilised

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average annual rate: +6%

100 yuan = … US $

2.5 to 5%

per

annum

21 J

uly

, 2005

25 J

uly

, 2008

21 J

une,

2010

End of the 5% p.a. de facto FX policy

New leadership

Trading

range

widened to

+/- 2.0%

Latest data: May - 2014

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2006 2007 2008 2009 2010 2011 2012 2013 2014

USD Bn USD Bn

Exports (monthly, USD Bn)

Imports (monthly, USD Bn)

Trade balance (smoothed)

China: Trade flows

?

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US: manufacturing recovering; GDP forecast cut

The May ISM index (speed component) was up but still 2% below its 4Q 2013 average. The Surprise Gap

(acceleration component) rose significantly, hinting at a likely acceleration of the US economy

GDP growth is likely to accelerate during the year, thanks to a more benign fiscal drag (-0.75% vs. -1.75%

in 2013), more confident consumers and companies likely to spend more on equipment goods

Yet, a part of the production lost in 1Q will not be recouped. even a strong rebound in 2Q (say 4%) wouldn’t

save the year. We have cut our GDP forecast from 2.8% to 2.2%.

Source: ISM, Fed, AXA IM Research

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0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Surprise Gap, smoothed

Surprise Gap (Production - previous orders), normalised

Production component

March 2009

US Surprise Gap: Current production minus new orders 3 months agoSource: ISM (ex-Napm) survey

Recession warning Recovery signal

US Surprise Gap Index

February 2010

May 2011

August 2013

December 2007June 2012

Dec. 2011Feb. 2013

October 2008

February 2014

July 2009May 2014

-20

-10

0

10

20

30

40

50

60

70

80

90

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Production (lhs)

Aggregate hours (lhs)

Index - 100 = 2007

US Manufacturing production

3M / 3M annualised rate, %

Production growth (rhs)

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US: Q1 pothole passed, fundamentals improving

Corporate investment (x-structures) is growing slower than in the first phase of the recovery(2.5% on trend

vs. 10% in 2010-11), despite improving fundamentals. It is likely to accelerate in the course of the year.

More worrying and uncertain is the outlook for housing investment, which contributes to explain why the

Fed wants to check bond yields and mortgage rates.

As growth accelerates, the participation rate will rise, thus slowing the unemployment decline. Interestingly,

the perceived unemployment rate is not declining as fast as the measured one. In its forward guidance, the

Fed will assess the labour market through a broader set of variables than the sole unemployment rate.

Source: BEA, , Department of Commerce, Conference Board, AXA IM Research

45

50

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

45

50

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Corp. Invest.,equipmentsoftwares andintangibles(10%)

Privateconsumption(68%)

GDP (100%)

Gov't spending(19%)

Residentialinvestment(3%)

Volume indexes; 100 = average (2001-2007)

US GDP and demand components

1

2

3

4

5

6

7

8

9

10

11

1

2

3

4

5

6

7

8

9

10

11

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

'Perceived' unemployment rate Actual unemployment rate

Actual: extrapolated trend 'Perceived': extrapolated trend

10.8%

7.8%

Subjective unemployment = 5.8+ 0.06 * (balance of opinion on current jobs - Conference Board)OLS, 1978-2013, R2=0.83

10.0%

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US Consumers: the return of wealth

As long as the personal saving rate rises, consumer spending could not but disappoint. This is what

happened until 3Q 2010. As wealth rises and net debt declines, the savings rate may decline –again.

Based on 1Q net wealth data, the personal savings rate could fall by another 1 pp during the year, thereby

boosting consumer spending

The stabilisation of the debt/income ratio (at end-2002 level) is consistent with the wealth-based analysis

Source: BEA, AXA IM Research. Latest data: 1Q 2014 (NIPAs revised from 1929)

0

2

4

6

8

10

12

14

40

50

60

70

80

90

100

110

120

130

140

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Household total credit market debt Debt trend

Gross saving rate (smoothed) Gross saving rate

Debt, % of disposable income Saving, % of disposable income

Debt trend (1975-1999)

Debt overhang: between 9% and -7%% of income,

as of Mar. 2014

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

CORRELATION = - 0.71

Personal gross savings rate, % of personal disposable income (left

hand scale)

Ratio Net wealth / annual disposable income (right hand scale)

Consistent with 3.0% savings rate

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logotype) 20

What monetary indicators say

US Fed: money gap positive, money multiplier declining

The Fed’s obsession: do not repeat the mistakes of 1930 Former chairman Bernanke was the first scholar to demonstrate that Milton Friedman, not JM Keynes, was right about

the cause of the 1930 depression: it was the contraction of money supply, not fiscal austerity

When QE3 ends, the monetary base will have increased 5 times compared to pre-Lehman

The test will come when the money multiplier, so far low and stable, starts rising. Then, the Fed will have to

shrink its balance sheet accordingly. This is not (yet) part of the official exit strategy of the Fed.

Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM Source: Federal Reserve Board, AXA IM Research

8.6

8.7

8.8

8.9

9.0

9.1

9.2

9.3

9.4

2

3

4

5

6

7

8

9

10

Jan

-04

Jul-

04

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

US: Broad money and money multiplier

Money multiplier (left hand scale)= M2 / Monetary base,

Ln (M2), right hand scale

Ratio log (US$ bn)

6%

Long term trend (5.5% p.a.)

0

2,000

4,000

6,000

8,000

10,000

12,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan-0

4

Ma

y-04

Sep

-04

Jan-0

5

Ma

y-05

Sep

-05

Jan-0

6

Ma

y-06

Sep

-06

Jan-0

7

Ma

y-07

Sep

-07

Jan-0

8

Ma

y-08

Sep

-08

Jan-0

9

Ma

y-09

Sep

-09

Jan-1

0

Ma

y-10

Sep

-10

Jan-1

1

Ma

y-11

Sep

-11

Jan-1

2

Ma

y-12

Sep

-12

Jan-1

3

Ma

y-13

Sep

-13

Jan-1

4

Ma

y-14

Sep

-14

US: Monetary base and broad money

Bank reserves (left hand scale)

Monetary base (left hand scale)

US$ bn US$ bn

Monetary base:+$ bn

i.e. +

Broad money (M2):

+ 42%

M2 (right hand scale)

Lehman Bros bankruptcy

End o

f Q

E s

imula

tion

3,050

348%

Latest data: 01/05/2014

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Japan: losing steam? Watch Capex

Master piece of Abenomics, the BoJ decision to double its monetary base and reach 2.0% inflation has

weakened the yen, boosted equity prices and raised companies as well as consumers’ expectations.

GDP growth took off in 1Q (6.7% annualised growth), as consumers tried to beat the 3pp tax hike. A

payback is due in 2Q, but the Tankan-based Surprise Gap is consistent with a re-acceleration in 3Q. Even

pricing in a 3.5% GDP dip in 2Q, our 1.7% GDP growth forecast for the full year looks reasonable.

Corporate investment (capex) was re-ignited by Abenomics: capex was up 11.6% in the last 12M. We

expect 1.7% GDP growth in 2014, after 1.5% in 2013.

Source: MoF, AXA IM Research

-15

-10

-5

0

5

10

15

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Manufacturing production,

(quarterly growth, %, RHS)

Tankan based Surprise Gap(standard deviation, LHS)

Japan: Manufacturing production and Tankan based Surprise Gap

Tankan based Surprise Gap(Smoothed), LHS)

60

70

80

90

100

110

120

130

140

80

85

90

95

100

105

110

115

120

20012002200320042005200620072008200920102011201220132014

Gov't consumption (20%), LHS Consumption (60%), LHS

GDP (100%), LHS Fixed investment (20%), LHS

Exports (15%), RHS

Japan: GDP and final demand componentsVolume indexes; 100 = average (2001-2007)

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What central banks say

Japan: QE likely to extend into 2015

Abe’s second arrow (fiscal stabilisation – 3pp rise of consumer tax in 2014/04, possibly another 2pp in

2015) and third arrow (reform agenda, including energy and medical sector deregulation, farmland

reform, special economic zones “tokku”) is now in place

Therefore, the BoJ is likely to support further the government policy by extending its purchases of

assets into 2015 and, probably into 2016. Bond yields will not rise any time soon.

Source: Gov. Kuroda

at Jackson Hole, 24

August 2014

Beyond 2014: AXA IM

estimates

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014

BoJ JGB holdings

Monetary base

Introduction of QQE

Bank of Japan balance sheet and QE, in ¥tn

End-2013 ¥200tn

End-2013 ¥141tn

End-2014 ¥270tn

End-2014 ¥190tn

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Europe: recovering from x3 dip caused by x3 deleveraging

€ area manufacturing fell again in recession at the end of 2011 and did not recover until 2Q 2013.

A triple-deleveraging (banks, consumers and governments) depressed domestic demand in 2011 and

2012. Southern economies are still hit by a credit crunch. With more neutral fiscal policies and banks on

the mend, the recovery, although sluggish, seems sustainable

On balance, Germany, which benefits from robust overseas demand and negative real interest rates, is

and will remain the powerhouse of Europe. Spain has bottomed out and could surprise on the upside


-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US

China*

€-area

Manufacturing production3M/3M, annualized rate

%

* YoY for China

65

70

75

80

85

90

95

100

105

110

65

70

75

80

85

90

95

100

105

110

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Germany

France

Italy

Spain*

Manufacturing productionIndexes, 100 = 2007

* Total industrial production

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€-area manufacturing: sluggish recovery

The €-area Surprise Gap (SG) has been broadly neutral since the beginning of the year, supporting the

scenario of a weak manufacturing recovery

Beneath the surface, companies are incrementally more positive on underlying demand trends

The €-area is more sensitive than the US or Japan to the escalation of the Ukrainian crisis.

Sourc

e: If

o, In

see,

Ista

t, IN

E, C

BS

, B

NB

, A

XA

IM

Researc

h

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

May 2009

April 2008

Euro Area Surprise Gap Index

EA Surprise Gap: Current production minus production plans 3 months ago

Recession warning Recovery signal

December 2008 : -2.4

August

2013

May 2011

Feb 2012

May 2012May

2014

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What € bond markets say

€-Spreads: convergence at the long end? not quite

Consistent euro politics (LTROs + €-Summit + threat of OMTs) have reversed the dynamics of spreads, in

favor of Ireland, Spain and Italy, especially for short durations.

5Y in 5Y spreads have been declining on trend since July 2012. They are now fluctuating around 200 bps

for Italy and Spain. A significant credit risk and/or a smaller euro club in the longer term are still priced in.

This is not deterring yield-chasing investors.

Warning: the German Constitutional Court may cast doubts about the credibility of OMTs, depending on

its reaction to the European Court of Justice decision (expected this year)

Source: Bloomberg, Datastream, AXA IM research

0

100

200

300

400

500

600

700

800

0

100

200

300

400

500

600

700

800

Spain

Italy

Belgium

France

Austria

Netherlands

2Y spreads vs. German bonds

25 Nov. 2011

24 Jul. 2012

0

100

200

300

400

500

600

700

800

900

0

100

200

300

400

500

600

700

800

900

Spain

Italy

Ireland

Belgium

France

Finland

Netherlands

5Y in 5Y spreads vs. German bonds

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logotype) 26


ECB: flat money supply hints at deflation risk

The ECB is struggling to boost money supply M3 is almost flat: +0.8% 3M/3M annualized in April 2014 (0.9% on a 3M vs. 3M previous year basis)

Against its long term trend, M3 is running 20% below. The ECB’s monetary base has fallen below its pre-crisis trend

The purpose of the upcoming TLTRO (targeted LTRO) is to boost credit to companies, thus money supply

‘Pure’ QE is very unlikely: high political costs vs. low and uncertain reward The ECB may opt for other assets (ABS for instance); this is unlikely to be large enough to kick start money supply

The most promising channel is the restructuring of the banking system, but this might take years

Source: ECB monthly bulletin Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM

8.2

8.4

8.6

8.8

9.0

9.2

9.4

9.6

5

6

7

8

9

10

11

12

13

14

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

€ area: M3 and multiplier (M3/monetary base)

Money multiplier= M3/monetary baseLeft hand scale

Ln (M3), right

hand scale

Ratio log (€ bn)

Ln(M3) trend01/1999 to 12/2011[6.7% p.a.]

- 20%

(€ 2.5Tn)

0

100

200

300

400

500

600

700

800

900

1,000

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

01/2

00

1

01/2

00

2

01/2

00

3

01/2

00

4

01/2

00

5

01/2

00

6

01/2

00

7

01/2

00

8

01/2

00

9

01/2

01

0

01/2

01

1

01/2

01

2

01/2

01

3

01/2

01

4

01/2

01

5

Monetary base, left hand

Deposit facility, right hand scale

€ bn € bn

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ECB: challenged by credit decline and acting

Sources: ECB, AXA IM Research

The endless decline of new loans to companies is a serious cause for concern

With the GDP weighted 10Y average government bond yield at 2.0%, vs. nominal GDP running at

1.8%Y (1Q 2014), monetary policy action aiming at lowering bond yields would be futile

The first wave of TLTROs (in 2014) will have little impact on credit supply, because of its weak

conditionality. On the other hand, it will contribute keeping bond yields low by subsidizing banks

After the publication of the stress tests, the restructuring of the banking system will accelerate and the

conditionality of the next wave of LTROs will be hardened. If all goes as planned by the ECB (as

supervisor and monetary authority), credit supply should start accelerating in the course of 2015.

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

70

Jan-9

9Jul-9

9Jan-0

0Jul-0

0Jan-0

1Jul-0

1Jan-0

2Jul-0

2Jan-0

3Jul-0

3Jan-0

4Jul-0

4Jan-0

5Jul-0

5Jan-0

6Jul-0

6Jan-0

7Jul-0

7Jan-0

8Jul-0

8Jan-0

9Jul-0

9Jan-1

0Jul-1

0Jan-1

1Jul-1

1Jan-1

2Jul-1

2Jan-1

3Jul-1

3Jan-1

4Jul-1

4

Bns EUR, Monthly flows Loans to non-financial corporations

April 2014

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

50

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

50

Jan-9

9Jul-9

9Jan-0

0Jul-0

0Jan-0

1Jul-0

1Jan-0

2Jul-0

2Jan-0

3Jul-0

3Jan-0

4Jul-0

4Jan-0

5Jul-0

5Jan-0

6Jul-0

6Jan-0

7Jul-0

7Jan-0

8Jul-0

8Jan-0

9Jul-0

9Jan-1

0Jul-1

0Jan-1

1Jul-1

1Jan-1

2Jul-1

2Jan-1

3Jul-1

3Jan-1

4Jul-1

4

Billions EUR, Monthly flows

Loans to households

April 2014

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Baseline 2014-18: quantitative scenario (1)

Sourc

e: IM

F, D

ata

str

eam

, A

XA

IM

Researc

h

As of: 16-Jun-2014

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

World GDP (PPP) 5.3 2.7 -0.4 5.2 3.9 3.2 3.0 3.3 3.4 3.3 3.3 3.3

World GDP (market FX rate) 3.9 1.5 -2.1 4.1 3.0 2.5 2.6 3.0 3.1 3.1 3.0 3.0

USA 1.8 -0.3 -2.8 2.5 1.8 2.8 1.8 2.2 2.8 2.8 2.7 2.7

Euro area 3.0 0.3 -4.4 1.9 1.6 -0.6 -0.4 1.1 1.4 1.4 1.4 1.4

UK 3.4 -0.8 -5.2 1.7 1.1 0.3 1.4 3.3 2.7 2.5 2.4 2.4

Japan 2.2 -1.1 -5.5 4.7 -0.4 1.4 1.8 1.7 1.4 1.4 1.4 1.3

China 14.2 9.6 9.2 10.4 9.3 7.7 7.7 7.2 7.0 6.8 6.7 6.5

Rest of Asia 7.6 4.0 5.5 8.7 5.8 5.4 4.8 4.4 4.3 4.2 4.1 4.0

RoW 4.3 2.5 -2.4 4.7 3.9 2.8 2.7 3.0 3.0 3.0 3.0 3.1

Global trade (manuf. goods) 6.5 2.2 -12.5 14.5 6.1 1.9 2.7 3.0 5.1 5.0 5.0 4.9

Inflation

US 2.9 3.8 -0.3 1.6 3.1 2.1 1.5 1.8 2.0 2.1 2.1 2.2

Euro area 2.1 3.3 0.3 1.6 2.7 2.5 1.4 0.5 1.4 1.5 1.75 2.0

UK 2.3 3.6 2.2 3.3 4.5 2.8 2.6 1.7 1.8 2.0 2.0 2.0

Japan 0.0 1.4 -1.1 -0.7 -0.4 -0.5 0.0 2.5 2.0 1.9 1.9 1.8

Crude oil (Brent), US$/bbl 72.6 97.3 61.7 79.9 111.6 112 109 110 112 113 116 118

% change 10.6 33.9 -36.6 29.5 39.7 0.4 -2.8 1.0 1.5 1.5 2.0 2.0

Interest rates, FX (end of period)

US

Fed funds (actual / target)- O/N 4.24 0.16 0.20 0.20 0.15 0.17 0.09 0.10 0.75 1.75 2.75 3.50

10Y Treasuries yield 4.03 2.25 3.84 3.31 1.88 1.80 3.01 2.9 3.5 3.9 4.3 4.6

Euro area

EONIA 3.86 2.49 0.39 1.0 0.63 0.13 0.17 0.05 0.05 0.05 0.5 1.0

10Y Bund yield 4.33 2.94 3.38 2.89 1.83 1.43 1.94 1.7 2.1 2.51 2.89 3.2

€1 = …US$ 1.46 1.35 1.46 1.34 1.33 1.33 1.38 1.35 1.34 1.33 1.32 1.31

Japan

Overnight call rate 0.47 0.46 0.11 0.0 0.10 0.09 0.10 0.1 0.1 0.1 0.1 0.75

10Y JGB 1.50 1.17 1.28 1.12 0.99 0.79 0.74 0.6 0.6 1.0 1.5 2.0

US$1 = … JPY 110 95 87 85 78 76 105 105 103 101 99 97

€1= … JPY 161 128 127 114 104 115 145 142 138 134 131 127

UK

BoE base rate 5.5 2.0 0.50 0.50 0.50 0.50 0.50 0.75 1.25 2.00 2.75 3.50

10Y gilt 4.50 3.09 4.11 3.51 1.98 1.96 3.03 3.0 3.5 4.0 4.3 4.6

€1= … GBP 0.73 0.95 0.89 0.85 0.86 0.81 0.83 0.79 0.75 0.76 0.76 0.77

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Baseline 2014-18: quantitative scenario (2)

Sourc

e: IM

F, D

ata

str

eam

, A

XA

IM

Researc

h

5.3

2.7

-0.4

5.2

3.9

3.2 3.03.3 3.4

3.3 3.3

3.3

-15

-10

-5

0

5

10

15

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

World GDP and trade (manufactured), % growth

World GDP

Global trade

GDP scale Trade scale20

40

60

80

100

120

140

-1

0

1

2

3

4

5

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

CPI Inflationannual change, %

US (left)

Euro area (left)

Crude oil (Brent, US$/bl)

Crude oil(right)

0

1

2

3

4

5

0

1

2

3

4

5

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Policy interest rates, %, end of year

Fed funds target

ECB(Eonia)

BoE base rate

0

1

2

3

4

5

0

1

2

3

4

5

2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f

Benchmark 10Y Bonds yield, %, end of year

US Treasuries

German Bunds

JGBs

UK Gilts

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Interest rates 2014-20 scenario: US


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

Fed funds target - O/N

5Y Treasury yield

10Y Treasury yield

US rates: baseline scenario

US Fed rate policy: first hike in late 2015, followed by 100bp increases in 2016 and 2017; long-term

neutral short term rate: 4.0% (consistent with 2.5% LT potential growth and 2.0% inflation target)

Note that this is consistent with Larry Summers statement to the WSJ: “I suspect unless circumstances

change fed funds rates may well average less than 3% over the next decade”

US Treasury curve: steady normalization of the term premium, converging toward 120bps, lower than

before the crisis because of Fed’s holdings of Treasuries.

Alternative scenario – Other things equal, a terminal rate for the Fed funds target at 3.5% instead of

4% would cut the 10Y yield long term target from 5.2% to 4.5%.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

Term Premium

Average expected 1Y rates

1Y Treasury yield

US rates: baseline scenario

Term premium

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Interest rates 2014-20 scenario: EUR


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

Refi / Eonia

5Y Bund yield

10Y Bund yield

ECB / German rates: baseline scenario

ECB rate policy: first hike in 2017, followed by 50, then 75bps increases in 2018-2020; long term

neutral short term rate: 3.3% (consistent with 1.5% LT potential growth and 2.0% inflation target)

German Bund curve: steady normalization of the term premium, converging toward 60bps, lower than

before the crisis because German Bunds continue to benefit from a safe haven premium

Alternative scenario (“Japanization”) - The ECB would keep its policy rate close to zero until 2018 and

raise it progressively to 3.0%, because of slower potential growth. 10Y Bund yields would converge

toward 3.4% in the long term, instead of 3.9% in our current projections, because of a lower terminal rate

and also a lower term premium, due to an hypothetical extension of the ECB’s balance sheet.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

Term Premium

Average expected 1Y rates

1Y Bund yield

German rates: baseline scenario

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Interest rates 2014-20 scenario: JP and UK


Japan BoJ rate policy: QE extended into 2015 / mid-2016, then tapering; first rate hike in 2017, then

gradual rise toward neutral rate (2.5%, consistent with 1.2% LT potential growth and 1.5% inflation)

JGB curve: yields capped below 1.0% by BoJ until 2016, then gradual rise toward 3.0%, which

assumes a 50bp term premium, explained by the large size of the BoJ’s holdings of JGBs

UK BoE rate policy: first rate hike toward the end of 2014 or early 2015, then very gradual rise toward

neutral rate (4.0%, (consistent with 2.5% LT potential growth and 2.0% inflation target)

Gilts curve: steady normalization of the term premium, converging toward 100bps, lower than before

the crisis because of BoE’s holdings of Gilts. If the BoE opted for sales of its portfolio, a higher premium

would be warranted

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

O/N = base rate

5Y JGB yield

10Y JGB yield

Japan rates: baseline scenario

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2014 2015 2016 2017 2018 2019 2020

O/N = base rate

5Y Gilt yield

10Y Gilt yield

UK rates: baseline scenario

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logotype) 33

AXA IM Research recommendation

Asset allocation - overall

Equities Short-term: Overweight

Worst over for emerging markets

Still ample liquidity but QE effect to fade

Long-term: Overweight

The recovery will be spread over years

Risk of recession very low

Valuations: slightly expensive

Government bonds Short-term: Underweight

US economy to pick up

With yields at historical lows, equities win

Long-term: Underweight

Expect further rise in long-dated yields (economic

healing, term premium, inflation risk)

Credit: Neutral (short and long term)

Tug of war between rising yields and low default

rates; quest for yield still intact

Less punitive capital requirements for long-term

investors; preference for short duration high yield;

valuation clearly less favorable today

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logotype) 34


Asset allocation – fixed income (UW)

Government bonds: Short-term: Underweight Fading systemic risk in emerging markets

US yield normalisation should resume as growth reaccelerates

and early signs of inflation appear

Long-term: Underweight Start of hiking cycle in US is expected by late 2015

Very large monetary base in US/UK imply inflation risk

Valuations are expensive

US curve slope: bear flattening in 2014 and beyond

EU curve slope: short end nailed at zero for 2 to 3 years, long

end more likely to rise than to fall

Inflation linked-bonds: Overweight Long term inflation expectations remain globally well anchored

Preference for US break-evens

Deflationary trends in the €-area = serious headwind

Government bonds Short term

(3-6M)

Medium term

(12-24M)

United States € area core € area periphery = =

UK

Japan =

Emerging = =

Swap spreads

Break-even = =

– United States

– Europe =

▲/▼ Changes of the month

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logotype)


Asset allocation – equities (OW)

United States (UW) + Growth likely to accelerate

- Elevated valuation; margins already high

Euro area (OW)

+ Declining systemic risk; attractive valuation

+ Earnings to rise thanks to margin expansion

United Kingdom (OW)

+ Cyclical improvement, reasonable valuations

- Normalization of monetary policy coming

Japan (neutral)

+ Improving macro; ample liquidity

- Yen depreciation already priced in

Emerging markets (neutral)

+ Attractive valuation; expect rebound of global trade

- Weak economic activity

Switzerland (UW)

- Expensive and defensive

35

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logotype)

Theme: Central Banks exit strategies

The shadow of Milton Friedman

“The quantity of money in the United States fell by one-third in the course of the

contraction. And it fell not because there were no willing borrowers -not because

the horse would not drink. It fell because the Federal Reserve System forced or

permitted a sharp reduction in the monetary base, because it failed to exercise the

responsibilities assigned to it in the Federal Reserve Act to provide liquidity to the

banking system. The Great Contraction is tragic testimony to the power of

monetary policy -not, as Keynes and so many of his contemporaries believed,

evidence of its impotence.”

“The Role of Monetary Policy”, Milton Friedman

The American Economic Review, Vol. 58, No. 1 (March 1968), p. 3

36 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM

Source: AXA IM Research – Manolis Davradakis

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logotype)


Central bankers heard Friedman’s call...

From March 2007 to March 2014, the BoE increased its balance sheet by 408%,

the Fed by 386%, the BoJ by 113% and the ECB by 85%


0

5

10

15

20

25

30

35

40

45

50

03

/20

07

08

/20

07

01

/20

08

06

/20

08

11

/20

08

04

/20

09

09

/20

09

02

/20

10

07

/20

10

12

/20

10

05

/20

11

10

/20

11

03

/20

12

08

/20

12

01

/20

13

06

/20

13

11

/20

13

04

/20

14

Central banks balance sheets - % of GDP

ECB

Fed

BoJ

BoE

0

5

10

15

20

25

30

35

40

45

03

/20

07

08

/20

07

01

/20

08

06

/20

08

11

/20

08

04

/20

09

09

/20

09

02

/20

10

07

/20

10

12

/20

10

05

/20

11

10

/20

11

03

/20

12

08

/20

12

01

/20

13

06

/20

13

11

/20

13

04

/20

14

Monetary base - % of GDP

ECB

Fed

BoJ

BoE

Source: Central Banks – AXA IM Research

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-100

-50

0

50

100

150

5 10 15 20 25 30

Ch

ange

in 1

0Y i

nfl

atio

n e

xpe

ctat

ion

s (s

wap

s), 2

014/

2009

Change in CB balance sheet (% of GDP), 2014/2007

JP

UK

USEUR

Source: Markit – AXA IM Research


... With some impact on inflation expectations

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Theme – Central Banks exit strategies

US Fed: targeting 2.0% inflation, or a price level path?

Sources: US Dpt of Commerce, AXA IM Research

In January 2012, the FOMC translated its mandatory price stability objective into a more concrete target,

namely, a “longer-run goal for inflation” of 2 percent*.

A possible interpretation of the commitment to achieve a 2% inflation rate in the “longer-run” is that the

Fed is actually targeting a 2%-sloped price path, instead of a mere 2% rate at any point in time

The average inflation rate observed from 1991until today has been 2.0%, supporting this interpretation

FOMC member Narayana Kocherlatova has recently expressed its interest for this option (May 2014)

(*) “The inflation rate over the longer run is primarily

determined by monetary policy, and hence the Committee

has the ability to specify a longer-run goal for inflation. The

Committee judges that inflation at the rate of 2 percent, as

measured by the annual change in the price index for

personal consumption expenditures, is most consistent over

the longer run with the Federal Reserve's statutory mandate.

Communicating this inflation goal clearly to the public helps

keep longer-term inflation expectations firmly anchored,

thereby fostering price stability and moderate long-term

interest rates and enhancing the Committee's ability to

promote maximum employment in the face of significant

economic disturbances.”

Board of Governors – Press release

January 25, 2012

-1

0

1

2

3

4

5

6

7

8

9

50

60

70

80

90

100

110

120

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

PCE price index (100 = 2009) PCE trend (1991-2013, slope: 1.97%)

PCE inflation (average: 1.99%) PCE inflation, smoothed

US Personal Consumption Expenditure Price Index(The inflation gauge targeted by the Fed)

Why this matters: if inflation stays below 2%

for a significant period of time, the Fed might

want to deliver inflation above 2% over a

significant period of time, and vice-versa.

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Theme – Central Banks exit strategies

ECB: targeting 1.99% inflation, or a price level path?

Sources: Eurostat, AXA IM Research

The primary mission of the ECB is to ‘maintain price stability: safeguarding the value of the euro’*

At the outset of the €, the interpretation of the Governing Council (GC) was ‘positive inflation below 2%’

Later on, it became ‘to maintain inflation below, but close to, 2% over the medium term’**

More recently, some members of the GC said that, practically, the target is 2.0%

Since this target is ‘over the medium term’, it is legitimate to ask whether the ECB is actually targeting a

2%-sloped price path, instead of a mere 2% rate at any point in time (see slide on the Fed)

The facts:

1/ average inflation since 1998 (creation of

the European Monetary Institute) is 2.00%

2/ the trend over the same period (2008-

2013) has a 2.08% slope

Why this matters: if inflation stays below

2% for a significant period of time, policy

makers should aim at delivering a higher

than 2% inflation rate during a significant

period of time, and vice-versa.

(*) in The Mission of the European Central Bank

ECB website

(**) Jean-Claude Trichet – Foreword to the 2011 edition of

‘The Monetary Policy of the ECB’

-2

-1

0

1

2

3

4

5

6

7

8

60

70

80

90

100

110

120

Eurozone HCPI (2005=100) HCPI trend (1998-2013, slope: 2.08%)

HCPI inflation (average: 2.00%) HCPI inflation, smoothed

Eurozone Harmonized Consumer Price Index

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logotype)


Unconventional policies raise long term risks

Risk #1: Fiscal dominance (Japan – US – UK)

Blowing up balance sheets was politically easy; deflating them won’t be. The

risk is monetary policy becoming an instrument of debt management

Among QE champions, only the BoE has alluded to sales of assets

Risk #2: Asset price detached from fundamentals (everywhere, including EMs)

If ‘low-flation’ has structural causes other than a lack of aggregate demand,

liquidity injections may inflate asset prices instead of real demand

Bubbling markets? US High Yield, €-periphery bonds, UK housing

Risk #3: Japan-isation (€-area)

In highly intermediated regions (€-area) flooding banks with liquidity may delay

restructuring and therefore keep the economy in a slow growth, very low

inflation and bond yields trap*

(*) “Zombie lending and depressed restructuring in Japan”, Ricardo Caballero, Takeo Hoshi and Anil

Kashyap, American Economic Review 2008, 98:5, 1943-1977


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Theme - Europe is not out of the woods

What to make of EU elections?

The rise of eurosceptic votes is so a large extent linked to the recessions that have hit most

euro zone countries post 2008. Yet, once this factor is controlled, not all countries are equal

Ireland

Finland

AustriaGermany

BelgiumNetherlands

Spain

France

Greece

Portugal

Italy

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

0% 10% 20% 30% 40% 50%

Ch

ange

in r

eal

GD

P p

er

cap

ita

20

13

/20

07

Percentage of eurosceptics MPs elected to European Parliament in 2014

Linear regression: Eurosceptic vote = 14.3% - 1.04*GDP loss (R2 = 0.37)

Correlation: -61%

-20% -10% 0% 10% 20%

France

NL

Austria

Greece

Italy

Germany

Ireland

Finland

Spain

Portugal

Belgium

Share of eurosceptic vote not explained by GDP

change since 2007

Sources: EU Parliament, AXA IM Research

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Recessions are political bombs

Whatever the reasons for the recessions endured by several euro area countries (GDP previously

artificially inflated by a credit bubble or by unsustainable public spending, or fiscal restriction), their

amplitude is, in several countries, dramatic enough to fuel anti-euro or nationalistic political reactions.

Which countries are better off,

compared to where they stood

before EMU? We look at real

GDP per capita.

Average growth at or above

1.0% p.a. from 1998 to 2013:

* Ireland (2.01%)

* Finland (1.47%)

* Austria (1.33%)

* Germany (1.30%)

Average growth below 1.0%:

* Belgium (0.92%)

* Netherlands (0.90%)

* Spain (0.81%)

* France (0.75%)

* Greece (0.34%)

* Portugal (0.23%)

* Italy (-0.14%) Source: Eurostat, AXA IM Research

95

100

105

110

115

120

125

130

135

140

145

150

95

100

105

110

115

120

125

130

135

140

145

150

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ireland

Finland

Germany

Belgium

Netherlands

Spain

France

Greece

Portugal

Italy

Gross domestic product per capita at constant pricesIndexed, 100=1998

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Asymmetric correction in imbalances

Pre-2008 current account imbalances within the euro area (German surplus vs. Spanish deficit) could not

be corrected through the nominal exchange rate (so long as countries remain in the euro)

The correction had to come from asset prices (stocks, properties and bonds), wages and domestic prices.

This is a relative story: higher wage inflation in Germany would have made the adjustment easier

In Ireland and Spain, where excesses came from the private sector, the macro adjustment is largely done

via deleveraging and fiscal retrenchment. In Portugal and Greece, where excesses came from government

spending ‘austerity’ has been doing the job. All countries have C/A in surplus or at equilibrium

The German and Dutch C/A surpluses are not receding, evidence that macro adjustments are not

coordinated. Worth noting: in 2013 H2, external trade contributed negatively to German GDP growth.

Source: datastream, AXA IM Research

Latest data: 3Q 2013

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Current account balance: deficit €-area countries

Ireland

France

Spain

Portugal

Italy

Greece

% of GDP

-4

-2

0

2

4

6

8

10

12

-4

-2

0

2

4

6

8

10

12

Current account balance: surplus €-area countries

Netherlands

Germany

Belgium

% of GDP

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Theme: Europe is not out of the woods

€-area imbalances: twin deficits watch (1) Greece & Portugal: excess of government spending

Twin deficits dynamics are revealing the root of a country’s macro-imbalance

Because of the rules of the monetary union, government + C/A deficits >> 10% of GDP is risky

C/A deficit caused by

excessive public spending

financed by gov’t debt


excessive private spending

financed by credit bubble

Greece has dramatically

reduced its imbalances,

Portugal sails in safer waters

Source: IMF, AXA IM Research

-15

-10

-5

0

5

-15 -10 -5 0 5

Curr

ent

account

bala

nce

Government balanceGreece

1995

2009

2007Danger zone

2013e

2000

-15

-10

-5

0

5

-15 -10 -5 0 5

Curr

ent

account

bala

nce

Government balancePortugal

1995

2009

2000

Danger zone

2013e

2007

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€-area imbalances: twin deficits watch (2) Spain & Ireland: excess of private spending





financed by gov’t debt



financed by credit bubble


-15

-10

-5

0

5

-15 -10 -5 0 5

Curr

ent

account

bala

nce

Government balanceSpain

1995

2009

2007

Danger zone

2013e

-15

-10

-5

0

5

-15 -10 -5 0 5

Curr

ent

account

bala

nce

Government balanceIreland

1995

2009

2007

Danger zone

2013e

[A one-off item sent the

government balance to -32% of GDP in 2010)

2000

Spain and Ireland

needs C/A surplus to

service external debt

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€-area imbalances: twin deficits watch (3) France and Italy: imbalances manageable, so far








-15

-10

-5

0

5

-15 -10 -5 0 5

Current account bala

nce

Government balanceItaly

1995

2013e

2007

Danger zone

-15

-10

-5

0

5

-15 -10 -5 0 5

Curr

ent account bala

nce

Government balanceFrance

1995

2013e

2007

Danger zone

2000

France has reduced

its fiscal, not its

external, imbalance

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logotype) 48 Eric Chaney, Chief Economist AXA Group, Head of research, AXA IM

Long-term, structural themes

By 2025, China should be as big as the US

… 70% larger than the €-area (vs. 30% smaller today)

… 4 times as large as India (alike today)

… 3.8 times as big as Japan (vs. 50% today)

Nominal GDP in US$,

trend growth

assumptions, % p.a.:

China: 11%

India: 11%

US: 5.1%

€-area: 3.0%

Japan: 2.0%

[Implicit real GDP

growth assumptions:

China: 5.5%

India: 5.5%

US: 2.5%

€-area: 1.0%

Japan: 0.5%]

75%

51%

31%

21%17% 16% 15%

12% 12%8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Euro

are

a

Chin

a

Japan

Germ

any

Bra

zil

Fra

nce

UK

India

Italy

Spain

Nominal GDPs in current US$, as % of the US GDP (2Q 2013)

Source: National Accounts

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logotype) 49 Eric Chaney, Chief Economist AXA Group, [email protected]


Unbridled credit supply = Recipe for financial crisis

Source: Schularick-Taylor NBER WP 15512- http://www.nber.org/papers/w15512. Aggregate data for 12 countries: Canada,

Australia, Denmark, Germany, Italy, the Netherlands, Norway, Spain, Sweden, US and UK.

12 countries, data reconstructed over 140 years, one conclusion: watch bank assets

1920-

1929

1998-2008

http://www.nber.org/papers/w15512

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The 4 stages of post-WWII globalisation

1950-1973: Allegro (ε = 1.6) US FDI in Europe and Japan

Productivity catch-up

Stable monetary system (until 1971)

1974-1987: Andante (ε = 0.9) Stagflation, oil price volatility

Beggar-thy-neighbour FX policies

1988-2008: Vivace (ε = 2.2) Globalisation turns global

Trade barriers fall

China enters the game

2008-?: lower trade elasticity Temporary (consumer deleveraging)?

Or more structural (rising income in

emerging economies shifting demand

from manufactures toward services...)

Source: WTO 2013 report – AXA IM Research

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

Log (world

trade)

Log (world

GDP)

ε T/Y =

0.9

ε T/Y = 2.3ε T/Y = 1.6 ε T/Y = 1.2 ?

1950-

1973

1974-

1987

1988-

2008

Phase I Phase II Phase III Phase IV

2010-

2013

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Debt: The post WWII US example

1946-1956

Debt/GDP

reduction: -60 pts

Contribution of real

growth: -18 pts

Contribution of

inflation: -17 pts

Contribution of

primary budget

balance: -13 pts

Source: BEA, OMB, AXA IM Research – Inflation is measured by the GDP deflator

Source: AXA IM estimates,

based on the first order

approximation of the

dynamic equation of the

debt.

-5.0

0.0

5.0

10.0

15.0

20.0

1941 1944 1947 1950 1953 1956 1959 1962 1965

0

25

50

75

100

125Federal debt, % of GDP

GDP growth, smoothed

Inflation, smoothed

1946 - 1956 :

Average real GDP growth: 3.6%

Average inflation: 3.3%

GDP, inflation, %Debt

19

46

: 1

22

%

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The optimal exit path: productivity (and labor force growth)

This is how US and Europe deflated the legacy debt burden

post WWII (US : innovation; Europe/Japan: catch-up)

1. Obama’s administration highly focused on innovation

2. Innovation: high return in developed economies, low return in

developing economies

3. Productivity and moderate inflation: best compromise


US: The inflation temptation

Simplistic arithmetic but food for thought:

7.0% nominal GDP growth

= 3.3% (inflation) + 3.6% (growth) [actual US mix post WWII]

= 4.0% (inflation) + 2.9% (growth) [possible post Great Recession path]

In both cases, initial debt burden halved in 10 years

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Could 1970s stagflation come back?

Over 1971-1982, US CPI inflation averaged 8% and high inflation turned out to

be unemployment-proof. The same happened in Europe, with two notable

exceptions: Germany and Switzerland.

With the benefit of hindsight, three main factors explained stagflation:

#1. Vietnam war and end of ‘dollar standard’ (15 August 1971). Enters ‘fiat

money’, good bye gold.

#2. Misguided monetary policies (stripping CPI from ‘transitory components’,

illusion of jobs/inflation trade-off)

#3. Real wage rigidities (indexation to prices, c.o.l.a. and other scala mobile,

please note: no German word for indexation)

Factors #2 and #3 have all but vanished. Hopefully, Fed will be less focused on

‘core inflation’ (reminiscence of Arthur Burns’ stripping habit).

Factor #1 remains: Iraq, Afghanistan vs. Vietnam. Fiat money is here to stay.

My personal view: stagflation is a red herring

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Long term, Fed may tolerate mild inflation

Source: US Department of Commerce, Federal Reserve, AXA IM Research, latest data December 2009

US inflation (PCEPI) - 1960-2009

0

5

10

15

20

25

30

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

0

5

10

15

20

25

30Frequency, in %

Personal consumption

expenditure price index:

Mean: 3.7

Median: 3.1

Modes: 2.5; 4.0

Consumer price index:

Mean: 4.1

Median: 3.4

Modes: 2.8; 6.8

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Buba- ECB won’t tolerate inflation

Source: Destatis - Eurostat, AXA IM Research, latest data December 2009

(German inflation 1960-1997)

U (€-area inflation 1998-2009)

0

5

10

15

20

25

30

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

0

5

10

15

20

25

30Frequency, in %

Consumer price index

Mean: 3.0

Median: 2.6

Modes: 2.2 ; 5.9

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ECB not really scared by deflation

Source: Eurostat, AXA IM Research, latest data November 2013

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

4.2

Frequency distribution of euro area HICP inflation, 1998-2013(YoY change of HICP, monthly data)

HICPMean: 1.97

Median: 2.05Modes: 1.9; 1.1

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What about hyperinflation?

What is hyperinflation?

Phillip Cagan defines hyperinflation as CPI increasing more than 50% per

month. In theory, hyperinflation is associated with the value of money

converging toward zero (debasement of currency). At the limit, money does not

buy any tangible good, i.e. real money balances decrease to zero. Practically,

hyperinflation may start when the relevant period to measure inflation is a

month, not a year.

What are the roots of hyperinflation?

Hyperinflation is associated with governments deliberately increasing money

supply in order to finance unsustainable spending. Because several central

banks are deliberately increasing their monetary base by monetizing various

assets (including, possibly, government debt), hyperinflation is evoked as a

possible outcome. However, increasing money supply is neither a sufficient

condition (think of the US in WWII) nor even a necessary condition for

hyperinflation. The latter may happen if the utility of the stock of money rises

slower than real money balances decrease, in other terms if confidence in

money evaporates. I find reasonable to assume that hyperinflation is

generally the result of both deliberate fast money supply expansion AND a

loss of confidence in institutions such as the central bank or the Treasury.

Hyperinflation is a possible outcome in seriously destabilised emerging economies

In the current circumstances, and even if the Fed and the ECB monetize government debts (as the BoJ did to

fend off deflation), hyperinflation is in my view excluded, at least as long as these central banks are in charge.

Yet, emerging economies severely destabilized by BoP crisis leading to large scale defaults may well fall into

hyperinflation, which, in our world, turns rapidly into dollar- or euro-ization.

Germany: Weimar Republic, 1923

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Biography

Eric Chaney

Chief Economist AXA Group

Head of Research, AXA Investment Managers

Member of the Executive Committee, AXA

Investment Managers

Eric Chaney is chief economist for the AXA Group since 2008. His mission is

to provide a vision on the most likely scenarios for the global economy in the

medium to long term, as well as an assessment of the main macroeconomic

risks, for the group and its main entities.

Within AXA Investment Managers, Eric leads the Research and Investment

Strategy team and promotes a multidisciplinary approach of Research,

directed toward quality and helping investment decision. Eric has launched the

AXA IM Symposium (Paris 2010, London 2011 and 2012, Paris 2013) which

featured prominent speakers such as Stephen Roach, Francesco Giavazzi,

Jacques de Larosière, Charles Goodhart, Sushil Wadhwani, P.O. Gourinchas,

Stephen Li Jen, Thomas Huertas, Richard Koo, Tim Tacchi, Thomas

Kirkwood.

From 2000 to 2008, Eric Chaney was Chief economist for Europe at Morgan

Stanley, which he had joined in 1995. Previously, he headed the economic

forecasting unit of the French statistical office (INSEE). Before that, he was

responsible for global forecasts and analysis at the French Treasury.

He has been associate professor at the French School of Administration

(ENA). Since 1997, Eric has been a member of the French Economic Council

of the Nation, which advises the Minister of finances. He is an independent

member of the French Tax Council since 2010. He sits on the Scientific boards

of the AXA Research Fund and of the Autorité des marchés financiers (AMF),

the French financial market watchdog.

A former professor of Mathematics and editor of a mathematical journal of the

University of Strasbourg, Eric also holds a Master’s Degree in economics and

econometrics from the Paris Graduate School of Economics, Statistics and

Finance (ENSAE ParisTech).

Eric lives in Paris, is married and has five children.

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logotype)

Glossary

Backwardation: situation whereby future commodity prices are lower than spot prices

Breakeven: expected inflation extracted from inflation-proof bonds (also called linkers)

Contango: situation whereby future commodity prices are higher than spot prices

Convertibility risk: refers to the possibility that a country member of the euro club would leave the club

Credit risk: for a bond, risk of default by the issuer (coupon or principal)

Fair value: econometric estimate of the price of an asset, given economic fundamentals. Despite its name, the ‘fair

value’ is not intrinsic, since it is model-dependent

Forward rate: expected future short term interest rate (1Y for instance) derived from the yield curve

Log (MSCI): looking at the logarithm of an economic indicator allows to see whether its growth rate is constant (straight

line), accelerating (upward curved or concave) or decelerating (downward curved or convex)

OMT: Outright Monetary Transaction, a name invented by the ECB to qualify potential purchases of government bonds

of a country having required financial help from the European Stabilisation Mechanism (ESM). Has never been used.

Risk premium: premium on top of the price of a financial asset asked by investors to compensate for uncertainties

about the future (default, liquidity condition, counterparty risk, stock market crash...)

Term (risk) premium: risk premium investors are asking to compensate for the uncertainty on future monetary policy,

given the path of short term interest rates that they anticipate. Comes on top of the geometric average of expected rates

Surprise gap: A reversal indicator extracted from business surveys (Ifo, Insee, ISM, Tankan...). As for European

surveys, computes the difference between the assessment made by companies on current production growth with the

expectations they were expressing three months earlier, on harmonised data (z-score)

Yield curve: curve showing the yields of same nature bonds of various maturities, traditionally from 3M to 10Y.

Zero coupon (yield) curve: for any bond paying annual or semi-annual coupons, it is possible to calculate the price of

an equivalent zero-coupon bond. Doing so all along the yield curve gives a fairer idea of market expectations, especially

in terms of forward rates.

Z-score: normalised time series: (x-m)/s, where x is the original variable, m its mean and s its standard deviation. The

unit is thus 1 standard deviation.

5Y in 5Y: five-year yield in five-year extracted from 10Y and 5Y yields of similar bonds (for instance zero-coupon

bonds), considering that the 10Y yield is the geometric average of 5Y and 5Y in 5Y yields. Using both nominal bonds

and inflation proof bonds, it is possible to extract 5Y in 5Y inflation expectations.


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logotype) 60 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM 60

Recent research from AXA IM

AXA IM research documents are available on: http://www.axa-im.com/en/research

The important thing is to participate 28/05/2014

In this article, we start by exploring the broad set of labor market indicators that the Fed is looking at to evaluate the recovery in the job market.

China: continue the economic miracle 22/05/2014

We develop a 2-part report that investigates China's past growth, current problems, and future prospects.

Credit spreads tight, be selective 30/04/2014

Corporate credit fundamentals remain solid and technical supply demand imbalance remains supportive for credit in both the US and EUR IG space. However, returns

are getting squeezed and, as we continue to tighten in what sometimes feels like a relentless grind to the bottom, the reality is that returns will be weaker this year than in the past two years. Japan: one year on, still in midstream 24/04/2014

We review the effects of the "shock and awe" strategy implemented by the government since it took office and lay out our expectations for the short and medium term.

US monetary policy expectations and emerging credit growth 17/04/2014

Credit growth in Emerging Asia is more sensitive to expected changes in US monetary policy, since Emerging Asia receives the lions' share in US portfolio flows.

China: debunking the shadow banking system 03/04/2014

This note on Chinese shadow banking is designed to provide a holistic view of the sector by discussing the structural factors propelling its rise, and how the system

functions and what it contributes to China's overall financial reform.

Euro area inflation: trough in sight 26/03/2014

In this article, we dig into recent developments in euro area inflation and lay out our expectations for the coming quarters.

Japanese equities and the yen - An almost 2-for 1 relationship 20/03/2014

The yen has fallen by close to 25% against the US$ since January 2013, with Japanese equities up by 60% over the same period.

Portfolio diversification and the return of leveraged loans 13/03/2014

Having essentially disappeared during the height of the sovereign crisis, leveraged loans are also making a return in Europe as investors warm to the potential return

and relative protection they offer in a world of rising rates.

US yield curve: a change on the horizon? 27/02/2014

Our view is that a bear steepening bias will come first, followed by a mild bear flattening to emerge already in the latter part of 2014

Emerging markets turmoil: 1997-98 redux? 20/02/2014

The duration and breadth of the selloff in emerging markets reminded investors of the 1997 Asian crisis, but the resemblance was hastily denied by market consensus.

We remain more prudent relative to the consensus.

End of QE: a cross-asset impact assessment 23 July 2013

The first stage of monetary normalisation, QE tapering, should probably start in September, with QE expected to be over by mid-2014.

http://www.axa-im.com/en/research



http://www.ft.com/intl/cms/s/2/783e39b4-e4af-11e3-9b2b-00144feabdc0.html#slide0

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http://connexion.axa-im.intraxa/docs/PDF/68666_130723ESSENTIALS_EN.PDF



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Disclaimer

This document is used for informational purposes only and does not constitute, on AXA Investment Managers Paris part, an offer to buy or sell, solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

Due to the subjective and indicative aspect of these analyses, we draw your attention to the fact that the effective evolution of the economic variables and values of the financial markets could be significantly different from the indications (projections, forecast, anticipations and hypothesis) which are communicated in this document.

Furthermore, due to simplification, the information given in this document can only be viewed as subjective. This document may be modified without notice and AXA Investment Managers Paris may, but shall not be obligated, update or otherwise revise this document.

All information in this document is established on data given made public by official providers of economic and market statistics. AXA Investment Managers Paris disclaims any and all liability relating to a decision based on or for reliance on this document.

Furthermore, due to the subjective nature of these analysis and opinions, these data, projections, forecasts, anticipations, hypothesis and/or opinions are not necessary used or followed by AXA IM Paris’ management teams or its affiliates who may act based on their own opinions and as independent departments within the Company.

By accepting this information, the recipients of this document agrees that it will use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party. Any reproduction of this information, in whole or in part, is unless otherwise authorised by AXA IM prohibited.

Editor : AXA INVESTMENT MANAGERS PARIS, a company incorporated under the laws of France, having its registered office located at Cœur Défense Tour B La Défense 4, 100, Esplanade du Général de Gaulle 92400 Courbevoie, registered with the Nanterre Trade and Companies Register under number 353 534 506, a Portfolio Management Company, holder of AMF approval no. GP 92-08, issued on 7 April 1992.

eric chaney's blue book, june 17, 2014

Economy & Finance

axa group head of research

chief economist axa

recovery emerging markets

axa im2

axa im central banks

gdp growth

us growth fed

eric chaney chief economist