Weekly Economic Briefing

Risky Business

23 May 2017

Global Overview

  • Although spillovers from political risk into market risk have so far been limited, a heightened sense of political uncertainty across both developed and emerging markets could jeopardise the continued global economic recovery.
  • In the US, despite recent allegations, impeachment still remains a tail-risk scenario with Republicans in control of the House and Senate. However, prolonged uncertainty alone could weigh on growth and risk assets.
  • Macron's success in the French presidential election removes a major source of near-term concern but will not remove the broader Eurosceptic populist impulse.
  • Although the prospect for sweeping legislative change in South Korea is limited, the election of new president Moon Jae-in reduces domestic policy uncertainty. However, South Korea remains exposed to substantial external risks.
  • The latest Brazilian political crisis threatens the developing economic recovery. A reduction in political capital reduces President Temer's ability to lead and jeopardises crucial structural reforms that underpin the optimistic outlook.
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US

The barriers to US presidential impeachment are high, especially with Republicans in control of both the executive and legislative branches. Regardless, prolonged uncertainty could weaken sentiment.

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UK

The vote to leave the European Union has created uncertainty over a range of economic and policy issues. Firms and households will have to live with this for some time.

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Europe

The French election result temporarily removes the risk of a major member exiting the Eurozone. However, the next risk is just around the corner…

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Japan & Developed Asia

Hopes are high for South Korea's incoming president. However, delivering on his political and economic pledges will prove challenging.

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Emerging Markets

The re-emergence of a political scandal threatening the Brazilian president threatens the outlook for much-needed reforms and risks Brazil's economic recovery.

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Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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