Charts of the week: European jobs, inflation and the markets, and entrepreneurial women
This week’s charts cover the following data:
Mapping bond and equity returns in historic inflation regimes
Investment returns are highly sensitive to inflation. While the effects are more direct on bonds, equities are affected too, despite the flexibility that corporations have to react to inflationary environments.
This colourful scatterplot visualises historic US investment returns in eras of high or low inflation – choosing 5 percent CPI growth as the threshold. Plotting every calendar year going back more than a century, we charted whether returns for the S&P 500 and 10-year government bonds were positive or negative. This results in four quadrants.
Red dots indicate the high-inflation years.
Using these quadrants, one correlation is obvious: most years with negative returns for both government bonds and equities have corresponded to years of high inflation.
The dotted diagonal line separates years where equities did better than bonds and vice versa. There are more years of equity outperformance, as the conventional wisdom would suggest.
With inflation remaining stubbornly high so far in 2023, we’re near the dead centre of this chart.
Eurozone unemployment eases in unison and unlike previous crises
European labour market conditions are unusually homogeneous.
This chart compares historic unemployment rates for 19 nations that use the euro (excluding Croatia, which adopted the currency this year).
The diamonds and bubbles compare the pre-pandemic readings in February 2020 with the present day. Most are back to the old normal.
Spain, Italy and Greece have a notably healthier job market today than they did three years ago.
The historic range for each nation, as shown with the green bar, reminds us that unemployment rates used to be wildly divergent in the eurozone; in the wake of the European sovereign-debt crisis a decade ago, Greek and Spanish unemployment surpassed 25 percent.
In search of a model to measure zero Covid and reopening in China
As the world focuses on China’s reopening, we’ve built a composite index to capture the waxing and waning of pandemic restrictions over the past three years.
Our index uses a broad range of daily alternative datasets, including port activity, road congestion, subway usage, international flights and box-office sales. The chart measures the z-score, or deviation from the historical mean (zero).
Throughout 2022, the composite index and most of its components were almost always below average. The strong shift since the start of 2023 is obvious; the most lively indicators are the rebound in box-office revenue and flights abroad.
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Macrobond news?
Join our latest webinar: Real estate in a time of rising rates – navigating the correction, anticipating the opportunity
Real estate is among the most sensitive assets to interest rates. With the world’s central banks well into a historic tightening cycle, what happens to one of the most widely held asset classes?
Liam Bailey , global head of research at Knight Frank , Carl Gomez , chief economist and head of market analytics at CoStar Group , and Simon Wallace , global co-head of real estate research and strategy at DWS Group , will discuss the cloudy outlook and potential opportunities.
Tune in to this expert panel of Macrobond users.
Guest blog: China and the positive spillovers to ASEAN nations
Following his presentation in our China reopening webinar, Singapore-based independent economist Michael Wan breaks down the implications for Southeast Asia.
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