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Jens Larsen
Jens Larsen
PhD
Macro Strategist

Industry experience

With Wellington

15
7

As a member of the firm’s Global Macro Strategy Group, Jens leads our efforts in equity-based sector and country macro research for the UK and Europe; he is also focused on thematic research in this region. Jens’ work is critical to portfolio managers and analysts around the firm as he translates macro data into investable ideas and themes.

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Every quarter, we survey around 100 of our Wellington colleagues in different investment disciplines and locations to get their views on what we see as the key macro questions of the day.

We believe that the framing of the questions is crucial. For example, many surveys ask respondents to list what they see as the current key risks. In our survey, we ask for the top three risks our participants believe the market is most complacent about. That requires them first to think about the risks — which are often fairly evident — and then to grade them on how far they are priced into markets. For us as investors, that is clearly the more important information, as it can help us to identify areas where the markets are mispricing risk and thus creating…

MACRO
Jens Larsen headshot
Jens Larsen
PhD
Macro Strategist
London
Benjamin Cooper
Ben Cooper
CFA
Multi-Asset Strategist
London

I believe that any deal on post-Brexit trade would allow UK risk assets to outperform given reduced uncertainty, the prospect of a rapid recovery in the first half of 2021 and attractive valuations. However, the deal would not resolve all the issues facing the UK.

What a Brexit deal won’t do

Under the terms of the deal being discussed at the time of writing, EU-UK trade would be on much less favourable terms than currently. The deal will probably exempt trade in goods from tariffs, which is positive; but it will not prevent non-tariff barriers or provide a framework for services exports. While there may be some regulatory alignment, the deal could allow the UK to deviate in the future, which could trigger retaliatory moves and jeopardise the whole framework. These factors point to further…

CORONAVIRUS
MARKETS
Jens Larsen headshot
Jens Larsen
PhD
Macro Strategist
London

While the UK equity market appears attractively valued and has the potential for a rebound, I remain neutral on UK equities for now as I believe the uncertain political outlook provides a poor basis for active risk taking. In essence, the outcome of the Brexit negotiations is hard to judge, and a non-cooperative outcome could prove highly disruptive for the UK economy and equities. In my view, this risk is not priced into the market at present.

The UK has had a poor COVID crisis

The UK’s health and economic outcomes have been in line with the worst in Europe, and managing this twin crisis will remain problematic in the near term. At the same time, the UK faces longer-term challenges, such as changes in the migration framework, a sharp rise in minimum wages and the perennial issues of low productivity growth and a large current-account deficit. Together, these near-term and structural challenges create a…

CORONAVIRUS
MARKETS
Jens Larsen headshot
Jens Larsen
PhD
Macro Strategist
London

While economic activity is likely to recover slowly in the euro area, I believe the risk of a much worse outcome has abated. Improved macroeconomic policy should lead to a stronger recovery, driving further reductions in the valuation gap between US and euro-area stocks.

The COVID-19 crisis has caused a deep recession in the eurozone, and I don’t expect activity to return to end-2019 levels until mid-2022. A recession of this magnitude leaves many kinds of economic scars. Jobs and businesses are destroyed, and the necessary reallocation of labour and capital is expensive and takes time. Balance sheets are damaged as a result of falling incomes, and the continued uncertainty constrains investment and consumption.

On the plus side, I believe Europe’s management of the health crisis and the economic policy response have been strong enough to substantially reduce downside risks to…

CORONAVIRUS
MARKETS
Jens Larsen headshot
Jens Larsen
PhD
Macro Strategist
London

COVID-19 impact on global supply chains

Localization. Digitization. Industrial protectionism. In the wake of COVID-19, the world is eager to form more resilient supply chains. These efforts could affect a range of industries as well as fiscal and monetary policy. In this 17-minute audiocast, Geopolitical Strategist Thomas Mucha speaks with members of our Global Macro Team about the future of global supply chains.

video-iframe

CORONAVIRUS
MACRO
Juhi Dhawan headshot
Juhi Dhawan
PhD
Macro Strategist
Boston
Jens Larsen headshot
Jens Larsen
PhD
Macro Strategist
London
Thomas Mucha
Thomas Mucha
Geopolitical Strategist
Boston

On June 4, the European Central Bank (ECB) announced significant changes to its €750 billion Pandemic Emergency Purchase Programme (PEPP), including an expansion of €600 billion and an extension until at least the end of June 2021. In my view, these moves, combined with the European Commission’s proposal for an EU recovery fund, leave euro-area equities poised to outperform US and UK equities over the next 12 months.

In particular, I have become more optimistic about German, French, Italian and Spanish equities. In macroeconomic terms, Germany looks set to outperform in the near and medium term. France has had a difficult crisis, but recent structural reforms should help its recovery. In Spain and especially Italy, I remain worried about high levels of debt and poor macro policy. But these are longer-term concerns, and French, Italian and Spanish equities have underperformed enough to warrant the same level of optimism as Germany.

My more positive view on euro-area equities is based on…

MACRO
MARKETS
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Jens Larsen
PhD
Macro Strategist
London
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