In recent weeks we have received a slew of requests for more insights about China’s changing role in the global economy, including its relationship with the United States, as well as the Federal Reserve’s ‘new’ shift towards average inflation targeting (AIT). Without question, both topics are important ones that reflect the increasing complexity of the current global macro environment. In our humble opinion, the U.S.–China relationship is likely to intensify further in the coming months, particularly ahead of the U.S. presidential election in November. However, given China’s importance to the global economy’s growth trajectory, we think there is still a significant benefit to investors who can thoughtfully deploy capital throughout Asia by leveraging an investment approach that is both local and global in nature. Meanwhile, we view the Federal Reserve’s new framework as a milestone announcement. In fact, AIT is likely the biggest shift in U.S. monetary policy since the introduction of quantitative easing (QE) at the end of the Global Financial Crisis. Not surprisingly, these two weighty topics — U.S.-China relations and the Fed’s recent shift in strategy — have significant long-term implications for all professionals of macro and asset allocation.
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