hello and welcome to ft markets aside
from the day-to-day movements in
interest rates stocks bonds and the
things which investors up having to pay
attention to every day what about the
big trends which are driving this world
what are the most important things that
we should be paying attention to to help
us think about that we're joined today
by young youngson a very experienced
fixed income investor for neuberger
berman hello young thanks for joining us
thank you for having me so in terms of
what's important I think we've got a
chart which a lot of people will
recognize here the US dollar over the
last 16 years so tell us what why is
this so important well this is very
important as you know this is the the
dollar has been and behind a lot of the
stress we've seen in markets today we've
seen massive appreciation of the dollar
of last 18 months and that has affected
commodity prices it has affected
different economies like China that is
struggling with an overvalued currency
that has been packed to the dollar so if
we can trace a lot of things that have
happened as we go through this chart and
if you look back you know since 2001
China joins the World Trade Organization
China's growing faster than us you was
slowing easing and the dollars house off
we go and through the financial crisis
and then towards the end of quote QE and
we're not at the end of tapering the
dollar has appreciated a lot and that
has caused a significant dislocation it
benefits home countries benefit and can
have very disruptive impact on other
countries and an asset markets I think
you've got a child here as well of sort
of some of the winners and losers
everybody has been losing against the
dollar but that benefits some more than
others yeah you can see on this chart
how dramatically the world has changed
if you go from the top you see the
chinese renminbi that china is obviously
struggling with a slowing economy the
currency plays a big role in that if you
go down the tried you can see here are
the tops of the economies that have been
not as successful in
managing or engineering a weaker
currency to remain competitive then it
is sort of the middle you have the euro
the ECB has been very successful in
managing down the currency and that is
economies you would expect to benefit
from this and then at the bottom you may
have some economies that have gotten a
little bit too far a little bit too much
of a good thing where you actually have
risk you having capital outflows CPI
spikes and more disruptive devaluation
of the currency so what's the big
conclusion you draw away from this this
is one trend that is rhyming a
significant change in competitiveness
and and and ability for economies to
generate growth and inflation there is a
second trend that is very important to
understand on what side you are on that
turned and that is the movement of
commodity prices and more specifically
energy prices and I think you've done
something similar here for oil as well
yes and if we just explain this I think
this is sort of you took 2014 and sort
of imports and exports of oil and
imagine the difference between a
hundred-dollar oil price and a $45 royal
price yeah and that this is who gains
and who loses yeah and that is very
important obviously we have seen oil
prices come down much more but we're
expecting lower for longer and if you
assume that that's a fair representation
of moving from hundred to 45 as a long
term then this would be the annual
impact and that's a significant wealth
transfer we're talking between the
different economies over one trillion
dollars that it's transferred annually
so that's a lot of money and if you took
it just at the consumer level that would
be around three trillion dollars
annually that are transferred from
producers of commodities to consumers so
that's a big wall strands variable
really dramatically affect the fortunes
of different economies over time and
we've just highlighted some of those
economies like India has benefits
dramatically from this so if you're on
the right side of the commodity trade
you know you are gaining from lower
import prices and your currency has sold
off then you have one on both those
trends and that is important to find
economies that are on
on the winning side of both or strengths
and as you go to all this you can see
Europe certainly benefit and this is
only looking at the oil so what Europe
is benefiting from the oil and the
currency so that sounds pretty
constructive for a sort of the content
thank you so it seems like oil and the
dollar the big trends which are driving
our world and which are set to continue
doing so