"Global economic growth good news for Guernsey"

Thursday 04 October 2018

An upcoming global economy boom and uncertainty over Brexit, is all good news for Guernsey, a visiting economist has said.

Christian Gattiker-Ericsson, Head of Research & Investment Solutions at Bank Julius Baer in Zurich, was in the island to present a bi-annual market outlook and provided an in-depth look at global economic performance as well as looking ahead to what kind of Brexit deal the UK can hope to achieve.

The global economy is currently in a period of steady growth, which should continue for the short term, Mr Gattiker-Ericsson said. This is the result of the strong performance of the economy of the United States, which has confounded the predictions of many experts.

The US 10-year yield – the return an investor will receive by holding a US bond for its full 10 years, until its maturity – is currently in a period of recovery having been on a downward curve since the 1980s.

“Investors are often damned to repeat the fate of years gone by as we’ve simply forgotten how previous situations panned out,” Mr Gattiker-Ericsson said.

“We are currently in a rerun of the 1950s, when slow reflation of the US 10-year bond led to a prosperous economy, but many current investors and fund managers simply weren’t around at that time so haven’t recognised it.

“There are many who argue that the US economy will soon stumble but our data indicates they are misguided. For example it’s often argued that the US has a demography problem as the baby boomer generation leaves the workforce and retires. However our research shows that the impact of this will be minimal thanks to the ‘echo boom’ - which is the baby boomers’ grandchildren joining the workforce.”

Christian Gattiker-Ericsson. 

Additionally, Mr Gattiker-Ericsson spoke about some of the potential outcomes of Brexit - and how the complex negotiation process did "nothing for economic security".

He said there was the potential for higher inflation, lower growth and a weak pound, but was nonetheless optimistic about Guernsey's future.

"Guernsey could well come out of Brexit looking much healthier than the UK. It is still a well-regarded jurisdiction with a proven track record and Brexit could result in job creation in Guernsey as people look to deal with a stable, experienced jurisdiction.”

Craig Allen, Head of Investment Management for Julius Baer Guernsey, painted a similarly positive picture and believes that all asset classes have performed well despite difficult conditions over the past 20 years and an especially trying climate in the last six months because of a variety of factors including the weak pound, a strong US dollar, Brexit uncertainty and an emerging markets crisis.

Pictured top: Mr Gattiker-Ericsson and Mr Allen.