In the wake of a fascinating week for markets, characterised by sharp falls in bonds, Brewin Dolphin’s Head of Research, Guy Foster is joined by Jonathan Wilmott, Head of Macro at Credit Suisse Asset Management. Discussing bonds’ fall from grace, Jonathan attests that global growth, which had been slowing into April, has now begun to pick up once more. Bond markets have responded violently partly because of the exceptionally low yields they had fallen to, which offer little return for the investors interested in fundamental value. Systematic fund managers, on the other hand, who use quantitative models based on moving averages to signal whether the manager should buy or sell fixed income maintain long positions while bonds are trending higher and now need to sell those holdings as the trend looks to reverse.

The conversation moves swiftly on from bond markets to productivity and in particular the reasons behind his view that productivity will continue to rise. Technological improvements are very difficult to quantify however Jonathan is excited about the potential to lower costs in two massively influential economic drivers: data collection and analysis, and the efficiency of battery power storage – the latter providing a means to harness intermittent sustainable sources of power and therefore significantly alter the basis of future real GDP growth. This is in stark contrast to academic Robert Gordon’s view that productivity has peaked and will now start to diminish.

Finally, and perhaps of some comfort to listeners, Jonathan extolls his faith in the Chinese authorities’ ability to manage slowing economic activity with the numerous monetary policy options available to them, leaving him bullish on Chinese and by implication economy. 

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