Eric Chaney's Blue Book, June 19, 2014

1
Eric Chaney
Chief Economist, AXA Group
Head of Research, AXA IM
Eric.Chaney@axa-im.com
June 2014
(Update 17 June, 2014)
Tracking the global recovery
 2014 growth forecast cut to 3.3%
 US = leading; China = insurance against downside
 Emerging markets: regaining market confidence
 Central banks: Fed-ECB ever more dovish
 Euro area: risk of persistent low inflation

2 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM2
The global macro outlook
 Global GDP forecast trimmed from 3.5 to ≈ 3.3% ; US GDP from 2.8 to 2.2%
► Global trade and the US are recovering from 1Q dip, not fast enough to plug the gap
► China has taken an insurance on GDP growth, with a 7.0% floor
► The emerging markets cycle is lagging behind but should benefit from US growth
 Fed: perceived as more dovish under Yellen than under Bernanke
► The new Chair is focused on the labour market, more than on financial stability
► Some FOMC members are ready to let inflation overshoot after having undershot
► Vice chair Stanley Fisher may take a more conservative view
 The recovery in Europe is too sluggish to fully offset deflationist forces
► Weak and uneven, the cyclical recovery is nevertheless supportive for equities
► The ECB has delivered an easing package; targeted liquidity injection is the new plan
► Absent QE (unlikely), bank restructuring is a necessary condition to the recovery
 Emerging markets: net capital inflows and market sentiment again positive
► Tapering being fully priced, the Fed’s dovish stance is –again- positive for EMs
► Country-specific political risks made things worse. They look less acute now
► The good news: emerging markets have proved resilient to capital flows gyrations

3 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM
Central banks: a tentative calendar for exits
 Bank of England: end 2014 / early 2015
 Federal Reserve: end 2015 / early 2016
 European Central Bank: 2017
 Bank of Japan: 2018

Main macro risks
Short term (3 to 6M):
 Markets challenging the Fed on its very dovish policy stance
Yellen’s Fed has become ever more dovish. A rise in inflation may question this stance
 Political instability in the Middle East sending crude oil prices through the roof
Two conflicts are yet unresolved: Israelis vs. Palestinians and Sunnis vs. Shias
 Political instability in Europe caused by votes on independence or EU membership
The rise in eurosceptic votes shows that tensions within the EU are building up
 Policy mistakes by Chinese policymakers causing an unexpected hard landing
China has to reform on several fronts while keeping GDP growth above 7%. Challenging!
Medium to long term:
 Very low inflation becoming entrenched in the euro area if bank restructuring is too slow
Following a large debt build-up, excessively low inflation would raise solvency issues
 Further French / German growth and fiscal divergence, markets testing France
France is now moving toward supply side reforms – at a snail pace
 Ill designed ‘exit strategies’ by big central banks (Fed/BoJ/BoE)
Inflating monetary bases to prevent deflation was easy. The opposite won’t be
 Mismanagement of the rise of China as regional superpower
From India to Japan through Philippines and Vietnam, worries are building up

What equity markets say
Equities: supported by risk appetite and liquidity
Source: MSCI, AXA IM Research
 Equity markets have shrugged off concerns
about Ukraine, China and oil (so far)
 Performances are comparable across regions
 The MSCI index has crossed the trend +1s.d.
line but valuations are not stretched (yet) and
risk appetite is strong
 The trend growth rate of real total return is in
line with the post-1971 era (2.4%)
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
Log (MSCI - World Equity Index*, inflation adjusted), 1=1970
*: Total return
Red line: real trend (non recursive HP filter,
lambda = 10^11)
Dotted lines: +/- 1 standard deviation of
deviation from mean
Deflator interpolated from US PCE deflator
As of: 17/06/2014
World US EMU (€) EU ($) EM ($)
-40.3% -37.1% -44.3% -46.1% -53.2% Through 2008
30.8% 27.1% 28.7% 36.8% 78.7% Through 2009
12.3% 15.4% 3.3% 4.5% 19.2% Through 2010
-5.0% 2.0% -14.1% -10.5% -18.2% Through 2011
16.2% 16.1% 18.0% 18.7% 18.5% Through 2012
27.4% 32.6% 24.4% 26.0% -2.3% Through 2013
5.5% 6.0% 8.1% 6.2% 5.4% Since 01 Jan 2014
3.2% 3.9% 3.8% 1.4% 1.7% Last four weeks
MSCI total return indexes (source MSCI)
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
MSCI World Equity
Index*Annualized real rate of return
*: Total return
Annualized rate of growth of smoothed (non recursive HP
filter, lambda = 10^11) inflation-adjusted total return index.
Deflator interpolated from US PCE deflator
Long-term average

What our models say
Equities: Risk Appetite Barometer positive
 Our in-house ‘Risk Appetite Barometer’ has increased further in June
 Its cyclical component (US and € Surprise Gaps) is now firmly in positive territory, led by the US. Also:
* The 3M momentum component is rising and is now above zero
* The average pair-wise correlation of US stocks is low, a sign that herd behaviour is not a risk
* The low vs. high credit quality spread is record high: investors see a recession as highly improbable
Rescaled weighted
average of four scores
(AXA IM surprise
gaps, Corporate bond
spread of spreads,
Average pair-wise
correlation of stocks &
3-month equity price
momentum)
Cyclical risk: first
score /
Systematic risk:
weighted average of
the last three scores
Sources:
Bloomberg,
Datastream,
Reference
document:
Market sentiment
indicators: less is
more – Mathieu
L’Hoir – AXA IM
Research
– May 24th 2012
-1.0
-0.5
0.0
0.5
1.0
-1.0
-0.5
0.0
0.5
1.0
2009 2010 2011 2012 2013 2014
Risk appetite
Risk aversion
Weekly Risk Appetite Barometer(RAB)
Systematic risk appetite
Cyclical risk appetite
Risk Appetite Barometer (RAB)
Latest Data:
17/06/2014

What bond markets say
Bonds boosted by dovish talk; € decoupling from US
 Markets see the first Fed hike in mid/late 2015, followed by 25bps hikes every two other FOMC meetings
 The ECB rate cuts and announced TLTRO had a small negative impact on Bund yields. Depending on the
speed of the restructuring of the banking system, the ECB may have to keep rate at zero until 2017
 The long term view: we are at the beginning of a secular bear market for US Treasuries. Once QE is over,
markets will reprice the term and inflation premia and reconsider the timing of rate hikes as time passes
 In the euro area, a Japanese scenario is a possibility, although not the main case
Source: Datastream, AXA IM Research
0
1
2
3
4
5
6
7
8
9
10
11
0
1
2
3
4
5
6
7
8
9
10
11
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
USA
Germany
US trend
Japan
Main benchmark 10Y bonds, annual yields%
All time lows:
US Treasuries: 1.40% on 24 July, 2012
Bunds: 1.15% on 31 May, 2012
JGBs: 0.43% on 13 June, 2003
Latest data:
17 June 2014
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
USA Germany
US trend Japan
%
First hint at
'imminent'
tapering

What bond markets say
Forward curves: hammered by Yellen and Draghi
 UST curve: Since end 2013, medium-long-term forwards have fallen by up to 70bps, while shorter forwards
were stable, as if markets were pricing slower long term growth or a lower duration risk premium
 The first speeches of Fed chair Janet Yellen have confirmed that she is on the dovish side re interest
rate policy. Yet, markets are trying to assess FOMC decisions, not only the chair’s views
 German curve: over the same period, the whole forward curve has eased. Markets have postponed by one
year their rate hike expectations. The term premium is still in negative territory: for the markets, a Japanese
scenario is not excluded. The ECB may have to diverge from the Fed over 2015-16
-100
-50
0
50
100
150
200
-100
-50
0
50
100
150
200
Average (1999-2012) TP for UST = 70bps
US Treasuries
German Bunds
A proxy for the term premium on 10Y UST and Bunds
(basis points, estimated from zero-coupon curves)
The term premium is from the Kim-Wright (Fed) model for UST
The proxy is a linear function of the 1Y in 7Y forward rate0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
1Y ...in 1Y ...in 2Y ...in 3Y ...in 4Y ...in 5Y ...in 6Y ...in 7Y ...in 8Y ...in 9Y
Euro curve, 13-Jun-14
US curve, 13-Jun-14
US curve, 27-Dec-13
Euro curve, 27-Dec-13
US and Germany
1Y forward rates derived from zero coupon curves%

What real bond markets say
Inflation futures: stabilisation
 Medium term (5Y) expectations have stabilised in the four constituencies we are tracking, with Japan and
the euro area at the low end, hovering around 1.2 / 1.3%
 Longer term (5Y in 5Y) expectations are broadly stable in the US, between 2.75 and 3.0%, and in the UK,
around 3.5%. They have declined to 2.0% in the €-area . If extended, this downward trend would
challenge the ability of the ECB to “anchor long-term inflation expectations”.
 With Fed, BoE and BoJ sailing in unchartered waters, investors may ask for a higher long term inflation
premium, at some point in time. The longer exit strategies are postponed, the higher the premium.
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
UK 5Y in 5Y US 5Y in 5Y
EUR 5Y in 5Y Japan 5Y in 5Y
Inflation swaps (breakevens), 5Y in 5Y
Latest data: 09/06/2014
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
UK 5Y US 5Y
EUR 5Y Japan 5Y
Inflation swaps (breakevens), 5Y

What commodities markets say
Commodities: Chaos in Iraq may cause a spike
 Base metal prices have been declining on trend since early 2011. The deceleration of headline
growth in China together with sluggish recoveries in developed economies and ‘end of QE’ headwinds for
emerging economies may fuel this downward trend further. Yet, at the moment, they are stable.
 Crude oil (Brent): while markets shrugged off tensions between Russia and the West (use of
strategic reserves by the US?), they are sensitive to the situation in Iraq. Long forwards indicate
convergence toward $100/bbl, once stamped ‘fair price’ by Saudi Arabia...
Source: Datastream AXA IM Research
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
0
1,000
2,000
3,000
4,000
5,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Brent, US$/bbl
HWWA Index
Brent
LME index
LME Metal Index
HWWA Agriculture
Raw Materials
Index -RHS
60
70
80
90
100
110
120
130
60
70
80
90
100
110
120
130
Crude oil futures, ICE Brent contracts
Spot Dec-2014
Dec-2016 Dec-2018
US$/bl
Latest data point: 18/06/2014

What FX markets say
Currencies: € overvalued vs. ¥ and $, £ rising fast
 Since Mr. Abe election, the JPY has fallen by 30%
BoJ is likely to expand further its monetary base
 The ECB is concerned by deflation. Followed by action, it
is EUR negative. If action fails, deflation is EUR positive
 Fed tapering should be USD positive. A stronger than
expected recovery in the US too.
Source: Federal reserve, ECB,
BoE, AXA IM Research
Nominal TW rate: Deviation from average(1999-2013)
As of: UK £ Euro JP Yen Swiss franc US $
17/06/2014 -6.2% 2.6% -4.3% 24.5% -9.5%
US$ real bilateral rate: Deviation from(1999-2012)
As of: US$ /Yen US$ / CHF US$ / UK£ US$ / €
17/06/2014 17% -18% -6% -9%
Euro real bilateral rate: Deviation from(1999-2012)
As of: € / Yen € / US$ € / UK £ € / CHF
17/06/2014 31% 10% 3% -7%
JPY real bilateral rate: Deviation from(1999-2012)
As of: JPY/€ JPY/US$ JPY/UK£ JPY/ CHF
17/06/2014 -25% -17% -23% -30%
70
80
90
100
110
120
130
140
150
70
80
90
100
110
120
130
140
150
2007 2008 2009 2010 2011 2012 2013 2014
CHF
JPY
EUR
USD
GBP
Average
1999-
2012
Nominal trade-weightedexchange rate, 100=average (99-13)
70
80
90
100
110
120
130
140
70
80
90
100
110
120
130
140
2006 2007 2008 2009 2010 2011 2012 2013 2014
€ / JPY € / US$ € / UK £ € / CHF
Euro bilateral exchange rate, adjusted for inflation trends
100 = average (99-13)
StrongeuroWeakeuro

What real economic indicators say
Global trade: roller coaster, weak underlying trend
 Global trade contracted in 1Q 2014 (-0.8%Q), a payback after an abnormally strong 4Q 2013 (+1.6%Q)
 The underlying trend (circa 3.5%) is significantly weaker than the longer trend (6%)
 Unless trade sharply rebounds in the coming months, global trade growth will disappoint again in 2014
 The elasticity of trade relatively to global growth has fallen from 1.5 before the global financial crisis to
less than 1 since then. Is this a structural shift? If it is, growth models based on exports would suffer.
Source: CPB, AXA IM Research
Volume
Price in US$
GlobalTrade
75
85
95
105
115
125
135
145
25
45
65
85
105
125
145
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Volumes (s.a.)
Prices / unit values in US$
March 2014
-21%
100 = 2005
Global trade in US$, 2008/06 to 2009/04: -32.5%
- 15%

Inflation/deflation balance: deflation has an edge
 Japan, the UK and a handful of emerging economies are operating above recent trends, by
a small margin. China is close to potential, Brazil below trend.
 Most of Europe is at or below trend, but the UK, which is now on a fast track
 Short term, risks are still tilted toward disinflation
 Bear in mind that the global component of inflation explains 70% of local inflation (*)
(*): More precisely, the share of inflation variance explained by a measure of global inflation is 71%, on
average, for Oecd economies. This share ranges from 60% for Germany to 68% for the US and 89% for
France. Source: Ciccarelli and Mojon, Global Inflation in The Review of Economics and Statistics, 2010.
Trend GDP is estimated with a non-recursive
HP filter, with lambda set at 10,000
(industrialised) or 5,000 (emerging)
-4
-3
-2
-1
0
1
2
3
-4
-3
-2
-1
0
1
2
3
Japan
Hungary
Malaysia
UK
US
Denmark
Australia
Canada
Indonesia
Germany
Turkey
China
Sweden
Korea
Romania
Switzerland
Chile
Mexico
France
Belgium
Russia*
Taiwan
Argentina*
Italy
Poland
India
Portugal
Ireland*
Spain
Brazil
Thailand
Netherlands
Greece
Output Gaps, 1Q 2014 (* = 4Q 2013)
Actual minus trend GDP as % of trend GDP
Operating above
trend Operating close to trend
Risk of
deflationOperating below trend
1.0% < OG -1.0% < OG < 1.0%
-2.5% < OG < -1.0%
OG < -2.5%
-3.8

Divergences within developed economies stabilised
Source: National Accounts, AXA IM Research
 Since the bottom of the 2009 recession, recoveries in the developed world have been heterogeneous.
 Canada, Switzerland and Sweden, all wide open economies, are doing better than others.
 Among larger developed economies, the US is leading, followed by Germany. The UK is catching up
 Japan has overtook France, where unemployment is still rising. Yet, mind the payback in 2Q
 Along larger economies, Italy remains the most worrying case, with GDP still 9% below the 2008 peak
86
88
90
92
94
96
98
100
102
104
106
108
110
86
88
90
92
94
96
98
100
102
104
106
108
110
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Canada US Germany
France Japan UK
Italy
Real GDP index
100 = average 3 quarters around peak
74
76
78
80
82
84
86
88
90
92
94
96
98
100
102
104
106
108
110
76
78
80
82
84
86
88
90
92
94
96
98
100
102
104
106
108
110
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sweden
Switzerland
Belgium
Netherlands
Ireland
Spain
Portugal
Greece
Real GDP index
100 = average 3 quarters around peak

China: deceleration under control; PBC role critical
 China’s GDP decelerated further in 1Q (1.4%Q vs. 1.7% in 4Q 2014), hit
by weak exports. Industrial production growth has landed just below 9%
 Thanks to the targeted stimulus decided by the government, the 7.0%
floor for GDP looks credible. We have cut our 2014 forecast to 7.2%.
 Financial jitters are likely, as PBC raises the ante to force banks to clean
their balance sheet. Yet, liquidity is controlled by PBC and a credit hard
landing is unlikely, in the short term at least
 Car sales are growing robustly (16%Y on trend), testimony of a re-
balancing toward consumer demand.
Source: NBS, Datastream, AXA IM Research
50
100
200
50
100
200
2006 2007 2008 2009 2010 2011 2012 2013 2014
Smoothed series
Raw series
China: vehicles production
(volume index - log scale)
2
4
6
8
10
12
14
16
18
2
4
6
8
10
12
14
16
18
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Real YoY
Real GDP quarterly
annualised (SAAR)
Trend growth (HP)
China - actual and trend real GDP growth
0
5
10
15
20
25
35
40
45
50
55
60
65
2006 2007 2008 2009 2010 2011 2012 2013 2014
China: NBS PMI and industrial value added 12M %
change
PMI index
Long term relationship between growth and PMI
Output % = -28 + 0.8*PMI
Breakeven around 35
PMI at 50 consistent with circa 10% growth in the long run
IP growth,
May 2014
PMI, April 2014

 Chinese exports fell from a cliff in February (-45% MoM), without any ‘economic’ rationale. Imports fell
much less (-22%), thus generating a trade deficit (=China exporting growth). Since then, exports have
recovered faster than imports; yet the current trend is puzzlingly flattish.
 This is why a limited fiscal stimulus was decided, together with a cut in the reserve requirement rate
 The message from the PBC was loud and clear: with financial liberalization coming, RMB/USD will no
more be a one-way bet. Note that the currency is now back on the 2.5% p.a. appreciation line.
Source: NBS, Datastream, AXA IM Research
China: sluggish exports, RMB stabilised
11
12
13
14
15
16
17
18
19
11
12
13
14
15
16
17
18
19
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Average annual rate: +6%
100 yuan = … US $
2.5 to 5%
per
annum
21July,2005
25July,2008
21June,2010
End of the 5% p.a.
de facto FX policy
New leadership
Trading
range
widened to
+/- 2.0%
Latest data: May - 2014
-20
0
20
40
60
80
100
120
140
160
180
200
220
-20
0
20
40
60
80
100
120
140
160
180
200
220
2006 2007 2008 2009 2010 2011 2012 2013 2014
USD Bn USD Bn
Exports (monthly, USD Bn)
Imports (monthly, USD Bn)
Trade balance (smoothed)
China: Trade flows
?

US: manufacturing recovering; GDP forecast cut
 The May ISM index (speed component) was up but still 2% below its 4Q 2013 average. The Surprise Gap
(acceleration component) rose significantly, hinting at a likely acceleration of the US economy
 GDP growth is likely to accelerate during the year, thanks to a more benign fiscal drag (-0.75% vs. -1.75%
in 2013), more confident consumers and companies likely to spend more on equipment goods
 Yet, a part of the production lost in 1Q will not be recouped. even a strong rebound in 2Q (say 4%) wouldn’t
save the year. We have cut our GDP forecast from 2.8% to 2.2%.
Source: ISM, Fed, AXA IM Research
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Surprise Gap, smoothed
Surprise Gap (Production - previous orders), normalised
Production component
March 2009
US Surprise Gap: Current production minus new orders 3 months ago
Source: ISM (ex-Napm) survey
Recession warning Recovery signal
US Surprise Gap Index
February
2010
May 2011
August 2013
December 2007
June 2012
Dec. 2011
Feb. 2013
October 2008
February 2014
July 2009
May 2014
-20
-10
0
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Production (lhs)
Aggregate hours (lhs)
Index - 100 = 2007
US Manufacturing production
3M / 3M annualised rate, %
Production growth (rhs)

US: Q1 pothole passed, fundamentals improving
 Corporate investment (x-structures) is growing slower than in the first phase of the recovery(2.5% on trend
vs. 10% in 2010-11), despite improving fundamentals. It is likely to accelerate in the course of the year.
 More worrying and uncertain is the outlook for housing investment, which contributes to explain why the
Fed wants to check bond yields and mortgage rates.
 As growth accelerates, the participation rate will rise, thus slowing the unemployment decline. Interestingly,
the perceived unemployment rate is not declining as fast as the measured one. In its forward guidance, the
Fed will assess the labour market through a broader set of variables than the sole unemployment rate.
Source: BEA, , Department of Commerce, Conference Board, AXA IM Research
45
50
55
60
65
70
75
80
85
90
95
100
105
110
115
120
125
130
135
45
50
55
60
65
70
75
80
85
90
95
100
105
110
115
120
125
130
135
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Corp. Invest.,
equipment
softwares and
intangibles
(10%)
Private
consumption
(68%)
GDP (100%)
Gov't spending
(19%)
Residential
investment
(3%)
Volume indexes; 100 = average (2001-2007)
US GDP and demand components
1
2
3
4
5
6
7
8
9
10
11
1
2
3
4
5
6
7
8
9
10
11
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
'Perceived' unemployment rate Actual unemployment rate
Actual: extrapolated trend 'Perceived': extrapolated trend
10.8%
7.8%
Subjective unemployment = 5.8+ 0.06 * (balance of opinion on current jobs - Conference Board)
OLS, 1978-2013, R2=0.83
10.0%

US Consumers: the return of wealth
 As long as the personal saving rate rises, consumer spending could not but disappoint. This is what
happened until 3Q 2010. As wealth rises and net debt declines, the savings rate may decline –again.
 Based on 1Q net wealth data, the personal savings rate could fall by another 1 pp during the year, thereby
boosting consumer spending
 The stabilisation of the debt/income ratio (at end-2002 level) is consistent with the wealth-based analysis
Source: BEA, AXA IM Research. Latest data: 1Q 2014 (NIPAs revised from 1929)
0
2
4
6
8
10
12
14
40
50
60
70
80
90
100
110
120
130
140
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Household total credit market debt Debt trend
Gross saving rate (smoothed) Gross saving rate
Debt, % of disposable income Saving, % of disposable income
Debt trend (1975-1999)
Debt overhang: between 9%
and -7%% of income,
as of Mar. 2014
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
CORRELATION = - 0.71
Personal gross savings
rate, % of personal
disposable income (left
hand scale)
Ratio Net wealth / annual disposable
income (right hand scale)
Consistent with 3.0% savings rate

20
What monetary indicators say
US Fed: money gap positive, money multiplier declining
 The Fed’s obsession: do not repeat the mistakes of 1930
 Former chairman Bernanke was the first scholar to demonstrate that Milton Friedman, not JM Keynes, was right about
the cause of the 1930 depression: it was the contraction of money supply, not fiscal austerity
 When QE3 ends, the monetary base will have increased 5 times compared to pre-Lehman
 The test will come when the money multiplier, so far low and stable, starts rising. Then, the Fed will have to
shrink its balance sheet accordingly. This is not (yet) part of the official exit strategy of the Fed.
Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM
Source: Federal Reserve Board, AXA IM Research
8.6
8.7
8.8
8.9
9.0
9.1
9.2
9.3
9.4
2
3
4
5
6
7
8
9
10
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
US: Broad money and money multiplier
Money multiplier (left hand scale)
= M2 / Monetary base,
Ln (M2), right hand scale
Ratio log (US$ bn)
6%
Long termtrend(5.5% p.a.)
0
2,000
4,000
6,000
8,000
10,000
12,000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
US: Monetary base and broad money
Bank reserves (left hand scale)
Monetary base (left hand scale)
US$ bn US$ bn
Monetary base:
+$ bn
i.e. +
Broad money (M2):
+ 42%
M2 (right hand scale)
Lehman Bros bankruptcy
EndofQEsimulation
3,050
348%
Latest data: 01/05/2014

Japan: losing steam? Watch Capex
 Master piece of Abenomics, the BoJ decision to double its monetary base and reach 2.0% inflation has
weakened the yen, boosted equity prices and raised companies as well as consumers’ expectations.
 GDP growth took off in 1Q (6.7% annualised growth), as consumers tried to beat the 3pp tax hike. A
payback is due in 2Q, but the Tankan-based Surprise Gap is consistent with a re-acceleration in 3Q. Even
pricing in a 3.5% GDP dip in 2Q, our 1.7% GDP growth forecast for the full year looks reasonable.
 Corporate investment (capex) was re-ignited by Abenomics: capex was up 11.6% in the last 12M. We
expect 1.7% GDP growth in 2014, after 1.5% in 2013.
Source: MoF, AXA IM Research
-15
-10
-5
0
5
10
15
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Manufacturing production,
(quarterly growth, %, RHS)
Tankan based Surprise Gap
(standard deviation, LHS)
Japan: Manufacturing production and Tankan based Surprise Gap
Tankan based Surprise Gap
(Smoothed), LHS)
60
70
80
90
100
110
120
130
140
80
85
90
95
100
105
110
115
120
20012002200320042005200620072008200920102011201220132014
Gov't consumption (20%), LHS Consumption (60%), LHS
GDP (100%), LHS Fixed investment (20%), LHS
Exports (15%), RHS
Japan: GDP and final demand components
Volume indexes; 100 = average (2001-2007)

What central banks say
Japan: QE likely to extend into 2015
 Abe’s second arrow (fiscal stabilisation – 3pp rise of consumer tax in 2014/04, possibly another 2pp in
2015) and third arrow (reform agenda, including energy and medical sector deregulation, farmland
reform, special economic zones “tokku”) is now in place
 Therefore, the BoJ is likely to support further the government policy by extending its purchases of
assets into 2015 and, probably into 2016. Bond yields will not rise any time soon.
Source: Gov. Kuroda
at Jackson Hole, 24
August 2014
Beyond 2014: AXA IM
estimates
0
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012 2013 2014
BoJ JGB holdings
Monetary base
Introduction
of QQE
Bank of Japan balancesheetand QE, in ¥tn
End-2013
¥200tn
End-2013 ¥141tn
End-2014
¥270tn
End-2014
¥190tn

Europe: recovering from x3 dip caused by x3 deleveraging
 € area manufacturing fell again in recession at the end of 2011 and did not recover until 2Q 2013.
 A triple-deleveraging (banks, consumers and governments) depressed domestic demand in 2011 and
2012. Southern economies are still hit by a credit crunch. With more neutral fiscal policies and banks on
the mend, the recovery, although sluggish, seems sustainable
 On balance, Germany, which benefits from robust overseas demand and negative real interest rates, is
and will remain the powerhouse of Europe. Spain has bottomed out and could surprise on the upside
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US
China*
€-area
Manufacturing production
3M/3M, annualized rate
%
* YoY for China
65
70
75
80
85
90
95
100
105
110
65
70
75
80
85
90
95
100
105
110
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Germany
France
Italy
Spain*
Manufacturing production
Indexes, 100 = 2007
* Total industrial production

€-area manufacturing: sluggish recovery
 The €-area Surprise Gap (SG) has been broadly neutral since the beginning of the year, supporting the
scenario of a weak manufacturing recovery
 Beneath the surface, companies are incrementally more positive on underlying demand trends
 The €-area is more sensitive than the US or Japan to the escalation of the Ukrainian crisis.
Source:Ifo,Insee,Istat,INE,CBS,BNB,AXAIMResearch
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
May 2009
April 2008
Euro Area Surprise Gap Index
EA Surprise Gap: Current production minus production plans 3 months ago
Recession warning Recovery signal
December 2008 : -2.4
August
2013
May 2011
Feb 2012
May 2012
May
2014

What € bond markets say
€-Spreads: convergence at the long end? not quite
 Consistent euro politics (LTROs + €-Summit + threat of OMTs) have reversed the dynamics of spreads, in
favor of Ireland, Spain and Italy, especially for short durations.
 5Y in 5Y spreads have been declining on trend since July 2012. They are now fluctuating around 200 bps
for Italy and Spain. A significant credit risk and/or a smaller euro club in the longer term are still priced in.
This is not deterring yield-chasing investors.
 Warning: the German Constitutional Court may cast doubts about the credibility of OMTs, depending on
its reaction to the European Court of Justice decision (expected this year)
Source: Bloomberg, Datastream, AXA IM research
0
100
200
300
400
500
600
700
800
0
100
200
300
400
500
600
700
800
Spain
Italy
Belgium
France
Austria
Netherlands
2Y spreads vs. German bonds
25 Nov. 2011
24 Jul. 2012
0
100
200
300
400
500
600
700
800
900
0
100
200
300
400
500
600
700
800
900
Spain
Italy
Ireland
Belgium
France
Finland
Netherlands
5Y in 5Y spreads vs. German bonds

26
ECB: flat money supply hints at deflation risk
 The ECB is struggling to boost money supply
 M3 is almost flat: +0.8% 3M/3M annualized in April 2014 (0.9% on a 3M vs. 3M previous year basis)
 Against its long term trend, M3 is running 20% below. The ECB’s monetary base has fallen below its pre-crisis trend
 The purpose of the upcoming TLTRO (targeted LTRO) is to boost credit to companies, thus money supply
 ‘Pure’ QE is very unlikely: high political costs vs. low and uncertain reward
 The ECB may opt for other assets (ABS for instance); this is unlikely to be large enough to kick start money supply
 The most promising channel is the restructuring of the banking system, but this might take years
Source: ECB monthly bulletin
Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM
8.2
8.4
8.6
8.8
9.0
9.2
9.4
9.6
5
6
7
8
9
10
11
12
13
14
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
€ area: M3 and multiplier (M3/monetary base)
Money multiplier
= M3/monetary base
Left hand scale
Ln (M3), right
hand scale
Ratio log (€ bn)
Ln(M3) trend
01/1999 to 12/2011
[6.7% p.a.]
- 20%
(€ 2.5Tn)
0
100
200
300
400
500
600
700
800
900
1,000
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
01/2001
01/2002
01/2003
01/2004
01/2005
01/2006
01/2007
01/2008
01/2009
01/2010
01/2011
01/2012
01/2013
01/2014
01/2015
Monetary base, left hand
Deposit
facility, right
hand scale
€ bn € bn

ECB: challenged by credit decline and acting
Sources: ECB, AXA IM Research
 The endless decline of new loans to companies is a serious cause for concern
 With the GDP weighted 10Y average government bond yield at 2.0%, vs. nominal GDP running at
1.8%Y (1Q 2014), monetary policy action aiming at lowering bond yields would be futile
 The first wave of TLTROs (in 2014) will have little impact on credit supply, because of its weak
conditionality. On the other hand, it will contribute keeping bond yields low by subsidizing banks
 After the publication of the stress tests, the restructuring of the banking system will accelerate and the
conditionality of the next wave of LTROs will be hardened. If all goes as planned by the ECB (as
supervisor and monetary authority), credit supply should start accelerating in the course of 2015.
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
-50
-40
-30
-20
-10
0
10
20
30
40
50
60
70
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Bns EUR, Monthly flows Loans to non-financial corporations
April 2014
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
50
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
40
45
50
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Billions EUR, Monthly flows
Loans to households
April 2014

Baseline 2014-18: quantitative scenario (1)
Source:IMF,Datastream,AXAIMResearch
As of: 16-Jun-2014
2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f
World GDP (PPP) 5.3 2.7 -0.4 5.2 3.9 3.2 3.0 3.3 3.4 3.3 3.3 3.3
World GDP (market FX rate) 3.9 1.5 -2.1 4.1 3.0 2.5 2.6 3.0 3.1 3.1 3.0 3.0
USA 1.8 -0.3 -2.8 2.5 1.8 2.8 1.8 2.2 2.8 2.8 2.7 2.7
Euro area 3.0 0.3 -4.4 1.9 1.6 -0.6 -0.4 1.1 1.4 1.4 1.4 1.4
UK 3.4 -0.8 -5.2 1.7 1.1 0.3 1.4 3.3 2.7 2.5 2.4 2.4
Japan 2.2 -1.1 -5.5 4.7 -0.4 1.4 1.8 1.7 1.4 1.4 1.4 1.3
China 14.2 9.6 9.2 10.4 9.3 7.7 7.7 7.2 7.0 6.8 6.7 6.5
Rest of Asia 7.6 4.0 5.5 8.7 5.8 5.4 4.8 4.4 4.3 4.2 4.1 4.0
RoW 4.3 2.5 -2.4 4.7 3.9 2.8 2.7 3.0 3.0 3.0 3.0 3.1
Global trade (manuf. goods) 6.5 2.2 -12.5 14.5 6.1 1.9 2.7 3.0 5.1 5.0 5.0 4.9
Inflation
US 2.9 3.8 -0.3 1.6 3.1 2.1 1.5 1.8 2.0 2.1 2.1 2.2
Euro area 2.1 3.3 0.3 1.6 2.7 2.5 1.4 0.5 1.4 1.5 1.75 2.0
UK 2.3 3.6 2.2 3.3 4.5 2.8 2.6 1.7 1.8 2.0 2.0 2.0
Japan 0.0 1.4 -1.1 -0.7 -0.4 -0.5 0.0 2.5 2.0 1.9 1.9 1.8
Crude oil (Brent), US$/bbl 72.6 97.3 61.7 79.9 111.6 112 109 110 112 113 116 118
% change 10.6 33.9 -36.6 29.5 39.7 0.4 -2.8 1.0 1.5 1.5 2.0 2.0
Interest rates, FX (end of period)
US
Fed funds (actual / target)- O/N 4.24 0.16 0.20 0.20 0.15 0.17 0.09 0.10 0.75 1.75 2.75 3.50
10Y Treasuries yield 4.03 2.25 3.84 3.31 1.88 1.80 3.01 2.9 3.5 3.9 4.3 4.6
Euro area
EONIA 3.86 2.49 0.39 1.0 0.63 0.13 0.17 0.05 0.05 0.05 0.5 1.0
10Y Bund yield 4.33 2.94 3.38 2.89 1.83 1.43 1.94 1.7 2.1 2.51 2.89 3.2
€1 = …US$ 1.46 1.35 1.46 1.34 1.33 1.33 1.38 1.35 1.34 1.33 1.32 1.31
Japan
Overnight call rate 0.47 0.46 0.11 0.0 0.10 0.09 0.10 0.1 0.1 0.1 0.1 0.75
10Y JGB 1.50 1.17 1.28 1.12 0.99 0.79 0.74 0.6 0.6 1.0 1.5 2.0
US$1 = … JPY 110 95 87 85 78 76 105 105 103 101 99 97
€1= … JPY 161 128 127 114 104 115 145 142 138 134 131 127
UK
BoE base rate 5.5 2.0 0.50 0.50 0.50 0.50 0.50 0.75 1.25 2.00 2.75 3.50
10Y gilt 4.50 3.09 4.11 3.51 1.98 1.96 3.03 3.0 3.5 4.0 4.3 4.6
€1= … GBP 0.73 0.95 0.89 0.85 0.86 0.81 0.83 0.79 0.75 0.76 0.76 0.77

Baseline 2014-18: quantitative scenario (2)
Source:IMF,Datastream,AXAIMResearch
5.3
2.7
-0.4
5.2
3.9
3.2 3.0
3.3 3.4
3.3 3.3
3.3
-15
-10
-5
0
5
10
15
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f
W orld GDP and trade (manufactured), % growth
W orld GDP
Global trade
GDP scale Trade scale
20
40
60
80
100
120
140
-1
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f
CPI Inflation
annual change, %
US (left)
Euro area
(left)
Crude oil (Brent, US$/bl)
Crude oil
(right)
0
1
2
3
4
5
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f
Policy interest rates, %, end of year
Fed funds target
ECB
(Eonia)
BoE base rate
0
1
2
3
4
5
0
1
2
3
4
5
2007 2008 2009 2010 2011 2012 2013 2014f 2015f 2016f 2017f 2018f
Benchmark 10Y Bonds yield, %, end of year
US Treasuries
German Bunds
JGBs
UK Gilts

Interest rates 2014-20 scenario: US
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
Fed funds target - O/N
5Y Treasury yield
10Y Treasury yield
US rates: baseline scenario
 US Fed rate policy: first hike in late 2015, followed by 100bp increases in 2016 and 2017; long-term
neutral short term rate: 4.0% (consistent with 2.5% LT potential growth and 2.0% inflation target)
Note that this is consistent with Larry Summers statement to the WSJ: “I suspect unless circumstances
change fed funds rates may well average less than 3% over the next decade”
 US Treasury curve: steady normalization of the term premium, converging toward 120bps, lower than
before the crisis because of Fed’s holdings of Treasuries.
 Alternative scenario – Other things equal, a terminal rate for the Fed funds target at 3.5% instead of
4% would cut the 10Y yield long term target from 5.2% to 4.5%.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
Term Premium
Average expected 1Y rates
1Y Treasury yield
US rates: baseline scenario
Term premium

Interest rates 2014-20 scenario: EUR
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
Refi / Eonia
5Y Bund yield
10Y Bund yield
ECB / German rates: baseline scenario
 ECB rate policy: first hike in 2017, followed by 50, then 75bps increases in 2018-2020; long term
neutral short term rate: 3.3% (consistent with 1.5% LT potential growth and 2.0% inflation target)
 German Bund curve: steady normalization of the term premium, converging toward 60bps, lower than
before the crisis because German Bunds continue to benefit from a safe haven premium
 Alternative scenario (“Japanization”) - The ECB would keep its policy rate close to zero until 2018 and
raise it progressively to 3.0%, because of slower potential growth. 10Y Bund yields would converge
toward 3.4% in the long term, instead of 3.9% in our current projections, because of a lower terminal rate
and also a lower term premium, due to an hypothetical extension of the ECB’s balance sheet.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
Term Premium
Average expected 1Y rates
1Y Bund yield
German rates: baseline scenario

Interest rates 2014-20 scenario: JP and UK
 Japan BoJ rate policy: QE extended into 2015 / mid-2016, then tapering; first rate hike in 2017, then
gradual rise toward neutral rate (2.5%, consistent with 1.2% LT potential growth and 1.5% inflation)
 JGB curve: yields capped below 1.0% by BoJ until 2016, then gradual rise toward 3.0%, which
assumes a 50bp term premium, explained by the large size of the BoJ’s holdings of JGBs
 UK BoE rate policy: first rate hike toward the end of 2014 or early 2015, then very gradual rise toward
neutral rate (4.0%, (consistent with 2.5% LT potential growth and 2.0% inflation target)
 Gilts curve: steady normalization of the term premium, converging toward 100bps, lower than before
the crisis because of BoE’s holdings of Gilts. If the BoE opted for sales of its portfolio, a higher premium
would be warranted
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
O/N = base rate
5Y JGB yield
10Y JGB yield
Japan rates: baseline scenario
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 2018 2019 2020
O/N = base rate
5Y Gilt yield
10Y Gilt yield
UK rates: baseline scenario

33
AXA IM Research recommendation
Asset allocation - overall
 Equities
Short-term: Overweight
 Worst over for emerging markets
 Still ample liquidity but QE effect to fade
Long-term: Overweight
 The recovery will be spread over years
 Risk of recession very low
 Valuations: slightly expensive
 Government bonds
Short-term: Underweight
 US economy to pick up
 With yields at historical lows, equities win
Long-term: Underweight
 Expect further rise in long-dated yields (economic
healing, term premium, inflation risk)
 Credit: Neutral (short and long term)
 Tug of war between rising yields and low default
rates; quest for yield still intact
 Less punitive capital requirements for long-term
investors; preference for short duration high yield;
valuation clearly less favorable today

34
Asset allocation – fixed income (UW)
 Government bonds:
Short-term: Underweight
 Fading systemic risk in emerging markets
 US yield normalisation should resume as growth reaccelerates
and early signs of inflation appear
Long-term: Underweight
 Start of hiking cycle in US is expected by late 2015
 Very large monetary base in US/UK imply inflation risk
 Valuations are expensive
 US curve slope: bear flattening in 2014 and beyond
 EU curve slope: short end nailed at zero for 2 to 3 years, long
end more likely to rise than to fall
 Inflation linked-bonds: Overweight
 Long term inflation expectations remain globally well anchored
 Preference for US break-evens
 Deflationary trends in the €-area = serious headwind
Government bonds
Short term
(3-6M)
Medium term
(12-24M)
United States
€ area core
€ area periphery = =
UK
Japan =
Emerging = =
Swap spreads
Break-even = =
– United States
– Europe =
▲/▼ Changes of the month

Asset allocation – equities (OW)
 United States (UW)
+ Growth likely to accelerate
- Elevated valuation; margins already high
 Euro area (OW)
+ Declining systemic risk; attractive valuation
+ Earnings to rise thanks to margin expansion
 United Kingdom (OW)
+ Cyclical improvement, reasonable valuations
- Normalization of monetary policy coming
 Japan (neutral)
+ Improving macro; ample liquidity
- Yen depreciation already priced in
 Emerging markets (neutral)
+ Attractive valuation; expect rebound of global trade
- Weak economic activity
 Switzerland (UW)
- Expensive and defensive
35

Theme: Central Banks exit strategies
The shadow of Milton Friedman
 “The quantity of money in the United States fell by one-third in the course of the
contraction. And it fell not because there were no willing borrowers -not because
the horse would not drink. It fell because the Federal Reserve System forced or
permitted a sharp reduction in the monetary base, because it failed to exercise the
responsibilities assigned to it in the Federal Reserve Act to provide liquidity to the
banking system. The Great Contraction is tragic testimony to the power of
monetary policy -not, as Keynes and so many of his contemporaries believed,
evidence of its impotence.”
“The Role of Monetary Policy”, Milton Friedman
The American Economic Review, Vol. 58, No. 1 (March 1968), p. 3
Source: AXA IM Research – Manolis Davradakis

Central bankers heard Friedman’s call...
From March 2007 to March 2014, the BoE increased its balance sheet by 408%,
the Fed by 386%, the BoJ by 113% and the ECB by 85%
0
5
10
15
20
25
30
35
40
45
50
03/2007
08/2007
01/2008
06/2008
11/2008
04/2009
09/2009
02/2010
07/2010
12/2010
05/2011
10/2011
03/2012
08/2012
01/2013
06/2013
11/2013
04/2014
Central banks balance sheets - % of GDP
ECB
Fed
BoJ
BoE
0
5
10
15
20
25
30
35
40
45
03/2007
08/2007
01/2008
06/2008
11/2008
04/2009
09/2009
02/2010
07/2010
12/2010
05/2011
10/2011
03/2012
08/2012
01/2013
06/2013
11/2013
04/2014
Monetary base - % of GDP
ECB
Fed
BoJ
BoE
Source: Central Banks – AXA IM Research

-100
-50
0
50
100
150
5 10 15 20 25 30
Changein10Yinflationexpectations
(swaps),2014/2009
Change in CB balance sheet(% ofGDP), 2014/2007
JP
UK
USEUR
Source: Markit – AXA IM Research
... With some impact on inflation expectations

Theme – Central Banks exit strategies
US Fed: targeting 2.0% inflation, or a price level path?
Sources: US Dpt of Commerce, AXA IM Research
 In January 2012, the FOMC translated its mandatory price stability objective into a more concrete target,
namely, a “longer-run goal for inflation” of 2 percent*.
 A possible interpretation of the commitment to achieve a 2% inflation rate in the “longer-run” is that the
Fed is actually targeting a 2%-sloped price path, instead of a mere 2% rate at any point in time
 The average inflation rate observed from 1991until today has been 2.0%, supporting this interpretation
 FOMC member Narayana Kocherlatova has recently expressed its interest for this option (May 2014)
(*) “The inflation rate over the longer run is primarily
determined by monetary policy, and hence the Committee
has the ability to specify a longer-run goal for inflation. The
Committee judges that inflation at the rate of 2 percent, as
measured by the annual change in the price index for
personal consumption expenditures, is most consistent over
the longer run with the Federal Reserve's statutory mandate.
Communicating this inflation goal clearly to the public helps
keep longer-term inflation expectations firmly anchored,
thereby fostering price stability and moderate long-term
interest rates and enhancing the Committee's ability to
promote maximum employment in the face of significant
economic disturbances.”
Board of Governors – Press release
January 25, 2012
-1
0
1
2
3
4
5
6
7
8
9
50
60
70
80
90
100
110
120
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
PCE price index (100 = 2009) PCE trend (1991-2013, slope: 1.97%)
PCE inflation (average: 1.99%) PCE inflation, smoothed
US Personal ConsumptionExpenditure Price Index
(The inflationgauge targetedbythe Fed)
 Why this matters: if inflation stays below 2%
for a significant period of time, the Fed might
want to deliver inflation above 2% over a
significant period of time, and vice-versa.

Theme – Central Banks exit strategies
ECB: targeting 1.99% inflation, or a price level path?
Sources: Eurostat, AXA IM Research
 The primary mission of the ECB is to ‘maintain price stability: safeguarding the value of the euro’*
 At the outset of the €, the interpretation of the Governing Council (GC) was ‘positive inflation below 2%’
 Later on, it became ‘to maintain inflation below, but close to, 2% over the medium term’**
 More recently, some members of the GC said that, practically, the target is 2.0%
 Since this target is ‘over the medium term’, it is legitimate to ask whether the ECB is actually targeting a
2%-sloped price path, instead of a mere 2% rate at any point in time (see slide on the Fed)
 The facts:
1/ average inflation since 1998 (creation of
the European Monetary Institute) is 2.00%
2/ the trend over the same period (2008-
2013) has a 2.08% slope
 Why this matters: if inflation stays below
2% for a significant period of time, policy
makers should aim at delivering a higher
than 2% inflation rate during a significant
period of time, and vice-versa.
(*) in The Mission of the European Central Bank
ECB website
(**) Jean-Claude Trichet – Foreword to the 2011 edition of
‘The Monetary Policy of the ECB’
-2
-1
0
1
2
3
4
5
6
7
8
60
70
80
90
100
110
120
Eurozone HCPI (2005=100) HCPI trend (1998-2013, slope: 2.08%)
HCPI inflation (average: 2.00%) HCPI inflation, smoothed
Eurozone HarmonizedConsumer Price Index

Unconventional policies raise long term risks
 Risk #1: Fiscal dominance (Japan – US – UK)
Blowing up balance sheets was politically easy; deflating them won’t be. The
risk is monetary policy becoming an instrument of debt management
Among QE champions, only the BoE has alluded to sales of assets
 Risk #2: Asset price detached from fundamentals (everywhere, including EMs)
If ‘low-flation’ has structural causes other than a lack of aggregate demand,
liquidity injections may inflate asset prices instead of real demand
Bubbling markets? US High Yield, €-periphery bonds, UK housing
 Risk #3: Japan-isation (€-area)
In highly intermediated regions (€-area) flooding banks with liquidity may delay
restructuring and therefore keep the economy in a slow growth, very low
inflation and bond yields trap*
(*) “Zombie lending and depressed restructuring in Japan”, Ricardo Caballero, Takeo Hoshi and Anil
Kashyap, American Economic Review 2008, 98:5, 1943-1977

Theme - Europe is not out of the woods
What to make of EU elections?
 The rise of eurosceptic votes is so a large extent linked to the recessions that have hit most
euro zone countries post 2008. Yet, once this factor is controlled, not all countries are equal
Ireland
Finland
Austria
Germany
Belgium
Netherlands
Spain
France
Greece
Portugal
Italy
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
0% 10% 20% 30% 40% 50%
ChangeinrealGDPpercapita2013/2007
Percentage of eurosceptics MPs elected to European Parliament in 2014
Linear regression:
Euroscepticvote = 14.3% - 1.04*GDP loss (R2 = 0.37)
Correlation:-61%
-20% -10% 0% 10% 20%
France
NL
Austria
Greece
Italy
Germany
Ireland
Finland
Spain
Portugal
Belgium
Shareof eurosceptic vote
not explained by GDP
change since2007
Sources: EU Parliament, AXA IM Research

Recessions are political bombs
 Whatever the reasons for the recessions endured by several euro area countries (GDP previously
artificially inflated by a credit bubble or by unsustainable public spending, or fiscal restriction), their
amplitude is, in several countries, dramatic enough to fuel anti-euro or nationalistic political reactions.
 Which countries are better off,
compared to where they stood
before EMU? We look at real
GDP per capita.
 Average growth at or above
1.0% p.a. from 1998 to 2013:
* Ireland (2.01%)
* Finland (1.47%)
* Austria (1.33%)
* Germany (1.30%)
 Average growth below 1.0%:
* Belgium (0.92%)
* Netherlands (0.90%)
* Spain (0.81%)
* France (0.75%)
* Greece (0.34%)
* Portugal (0.23%)
* Italy (-0.14%)
Source: Eurostat, AXA IM Research
95
100
105
110
115
120
125
130
135
140
145
150
95
100
105
110
115
120
125
130
135
140
145
150
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Ireland
Finland
Germany
Belgium
Netherlands
Spain
France
Greece
Portugal
Italy
Gross domestic product per capitaat constant prices
Indexed, 100=1998

Asymmetric correction in imbalances
 Pre-2008 current account imbalances within the euro area (German surplus vs. Spanish deficit) could not
be corrected through the nominal exchange rate (so long as countries remain in the euro)
 The correction had to come from asset prices (stocks, properties and bonds), wages and domestic prices.
This is a relative story: higher wage inflation in Germany would have made the adjustment easier
 In Ireland and Spain, where excesses came from the private sector, the macro adjustment is largely done
via deleveraging and fiscal retrenchment. In Portugal and Greece, where excesses came from government
spending ‘austerity’ has been doing the job. All countries have C/A in surplus or at equilibrium
 The German and Dutch C/A surpluses are not receding, evidence that macro adjustments are not
coordinated. Worth noting: in 2013 H2, external trade contributed negatively to German GDP growth.
Source: datastream, AXA IM Research
Latest data: 3Q 2013
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
Current account balance: deficit €-area countries
Ireland
France
Spain
Portugal
Italy
Greece
% of GDP
-4
-2
0
2
4
6
8
10
12
-4
-2
0
2
4
6
8
10
12
Current account balance: surplus €-area countries
Netherlands
Germany
Belgium
% of GDP

Theme: Europe is not out of the woods
€-area imbalances: twin deficits watch (1)
Greece & Portugal: excess of government spending
 Twin deficits dynamics are revealing the root of a country’s macro-imbalance
 Because of the rules of the monetary union, government + C/A deficits >> 10% of GDP is risky
C/A deficit caused by
excessive public spending
financed by gov’t debt
excessive private spending
financed by credit bubble
 Greece has dramatically
reduced its imbalances,
Portugal sails in safer waters
Source: IMF, AXA IM Research
-15
-10
-5
0
5
-15 -10 -5 0 5
Currentaccountbalance
Government balanceGreece
1995
2009
2007Danger zone
2013e
2000
-15
-10
-5
0
5
-15 -10 -5 0 5
Government balancePortugal
1995
2009
2000
Danger zone
2013e
2007

Spain & Ireland: excess of private spending
financed by gov’t debt
financed by credit bubble
-15
-10
-5
0
5
-15 -10 -5 0 5
Government balanceSpain
1995
2009
2007
Danger zone
2013e
-15
-10
-5
0
5
-15 -10 -5 0 5
Government balanceIreland
1995
2009
2007
Danger zone
2013e
[A one-off item sent the
government balance to
-32% of GDP in 2010)
2000
 Spain and Ireland
needs C/A surplus to
service external debt

France and Italy: imbalances manageable, so far
-15
-10
-5
0
5
-15 -10 -5 0 5
Government balance
Italy
1995
2013e
2007
Danger zone
-15
-10
-5
0
5
-15 -10 -5 0 5
Government balance
France
1995
2013e
2007
Danger zone
2000
 France has reduced
its fiscal, not its
external, imbalance

48 Eric Chaney, Chief Economist AXA Group, Head of research, AXA IM
Long-term, structural themes
By 2025, China should be as big as the US
 … 70% larger than the €-area (vs. 30% smaller today)
 … 4 times as large as India (alike today)
 … 3.8 times as big as Japan (vs. 50% today)
Nominal GDP in US$,
trend growth
assumptions, % p.a.:
 China: 11%
 India: 11%
 US: 5.1%
 €-area: 3.0%
 Japan: 2.0%
[Implicit real GDP
growth assumptions:
 China: 5.5%
 India: 5.5%
 US: 2.5%
 €-area: 1.0%
 Japan: 0.5%]
75%
51%
31%
21%
17% 16% 15%
12% 12%
8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Euroarea
China
Japan
Germany
Brazil
France
UK
India
Italy
Spain
Nominal GDPs in current US$, as % of the US GDP (2Q 2013)
Source: National Accounts

49 Eric Chaney, Chief Economist AXA Group, eric.chaney@axa-im.com
Unbridled credit supply = Recipe for financial crisis
Source: Schularick-Taylor NBER WP 15512- http://www.nber.org/papers/w15512. Aggregate data for 12 countries: Canada,
Australia, Denmark, Germany, Italy, the Netherlands, Norway, Spain, Sweden, US and UK.
 12 countries, data reconstructed over 140 years, one conclusion: watch bank assets
1920-
1929
1998-2008

The 4 stages of post-WWII globalisation
 1950-1973: Allegro (ε = 1.6)
 US FDI in Europe and Japan
 Productivity catch-up
 Stable monetary system (until 1971)
 1974-1987: Andante (ε = 0.9)
 Stagflation, oil price volatility
 Beggar-thy-neighbour FX policies
 1988-2008: Vivace (ε = 2.2)
 Globalisation turns global
 Trade barriers fall
 China enters the game
 2008-?: lower trade elasticity
 Temporary (consumer deleveraging)?
 Or more structural (rising income in
emerging economies shifting demand
from manufactures toward services...)
Source: WTO 2013 report – AXA IM Research
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Log (world
trade)
Log (world
GDP)
ε T/Y =
0.9
ε T/Y = 2.3ε T/Y = 1.6 ε T/Y =
1.2 ?
1950-
1973
1974-
1987
1988-
2008
Phase I Phase II Phase III Phase IV
2010-
2013

Debt: The post WWII US example
1946-1956
Debt/GDP
reduction: -60 pts
Contribution of real
growth: -18 pts
Contribution of
inflation: -17 pts
Contribution of
primary budget
balance: -13 pts
Source: BEA, OMB, AXA IM Research – Inflation is measured by the GDP deflator
Source: AXA IM estimates,
based on the first order
approximation of the
dynamic equation of the
debt.
-5.0
0.0
5.0
10.0
15.0
20.0
1941 1944 1947 1950 1953 1956 1959 1962 1965
0
25
50
75
100
125Federal debt, % of GDP
GDP growth, smoothed
Inflation, smoothed
1946 - 1956 :
Average real GDP growth: 3.6%
Average inflation: 3.3%
GDP, inflation, %
Debt
1946:122%

The optimal exit path: productivity (and labor force growth)
This is how US and Europe deflated the legacy debt burden
post WWII (US : innovation; Europe/Japan: catch-up)
1. Obama’s administration highly focused on innovation
2. Innovation: high return in developed economies, low return in
developing economies
3. Productivity and moderate inflation: best compromise
US: The inflation temptation
Simplistic arithmetic but food for thought:
7.0% nominal GDP growth
= 3.3% (inflation) + 3.6% (growth) [actual US mix post WWII]
= 4.0% (inflation) + 2.9% (growth) [possible post Great Recession path]
In both cases, initial debt burden halved in 10 years

Could 1970s stagflation come back?
 Over 1971-1982, US CPI inflation averaged 8% and high inflation turned out to
be unemployment-proof. The same happened in Europe, with two notable
exceptions: Germany and Switzerland.
 With the benefit of hindsight, three main factors explained stagflation:
#1. Vietnam war and end of ‘dollar standard’ (15 August 1971). Enters ‘fiat
money’, good bye gold.
#2. Misguided monetary policies (stripping CPI from ‘transitory components’,
illusion of jobs/inflation trade-off)
#3. Real wage rigidities (indexation to prices, c.o.l.a. and other scala mobile,
please note: no German word for indexation)
 Factors #2 and #3 have all but vanished. Hopefully, Fed will be less focused on
‘core inflation’ (reminiscence of Arthur Burns’ stripping habit).
 Factor #1 remains: Iraq, Afghanistan vs. Vietnam. Fiat money is here to stay.
My personal view: stagflation is a red herring

Long term, Fed may tolerate mild inflation
Source: US Department of Commerce, Federal Reserve,
AXA IM Research, latest data December 2009
US inflation (PCEPI) - 1960-2009
0
5
10
15
20
25
30
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
0
5
10
15
20
25
30
Frequency, in %
Personal consumption
expenditure price index:
Mean: 3.7
Median: 3.1
Modes: 2.5; 4.0
Consumer price index:
Mean: 4.1
Median: 3.4
Modes: 2.8; 6.8

Buba- ECB won’t tolerate inflation
Source: Destatis - Eurostat, AXA IM Research, latest data December 2009
(German inflation 1960-1997)
U (€-area inflation 1998-2009)
0
5
10
15
20
25
30
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
0
5
10
15
20
25
30
Frequency, in %
Consumer price index
Mean: 3.0
Median: 2.6
Modes: 2.2 ; 5.9

ECB not really scared by deflation
Source: Eurostat, AXA IM Research, latest data November 2013
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
4.2
Frequency distribution of euro area HICP inflation, 1998-2013
(YoY change of HICP, monthly data)
HICP
Mean: 1.97
Median: 2.05
Modes: 1.9; 1.1

What about hyperinflation?
What is hyperinflation?
Phillip Cagan defines hyperinflation as CPI increasing more than 50% per
month. In theory, hyperinflation is associated with the value of money
converging toward zero (debasement of currency). At the limit, money does not
buy any tangible good, i.e. real money balances decrease to zero. Practically,
hyperinflation may start when the relevant period to measure inflation is a
month, not a year.
What are the roots of hyperinflation?
Hyperinflation is associated with governments deliberately increasing money
supply in order to finance unsustainable spending. Because several central
banks are deliberately increasing their monetary base by monetizing various
assets (including, possibly, government debt), hyperinflation is evoked as a
possible outcome. However, increasing money supply is neither a sufficient
condition (think of the US in WWII) nor even a necessary condition for
hyperinflation. The latter may happen if the utility of the stock of money rises
slower than real money balances decrease, in other terms if confidence in
money evaporates. I find reasonable to assume that hyperinflation is
generally the result of both deliberate fast money supply expansion AND a
loss of confidence in institutions such as the central bank or the Treasury.
Hyperinflation is a possible outcome in seriously destabilised emerging economies
In the current circumstances, and even if the Fed and the ECB monetize government debts (as the BoJ did to
fend off deflation), hyperinflation is in my view excluded, at least as long as these central banks are in charge.
Yet, emerging economies severely destabilized by BoP crisis leading to large scale defaults may well fall into
hyperinflation, which, in our world, turns rapidly into dollar- or euro-ization.
Germany: Weimar Republic, 1923

Biography
Eric Chaney
Chief Economist AXA Group
Head of Research, AXA Investment Managers
Member of the Executive Committee, AXA
Investment Managers
Eric Chaney is chief economist for the AXA Group since 2008. His mission is
to provide a vision on the most likely scenarios for the global economy in the
medium to long term, as well as an assessment of the main macroeconomic
risks, for the group and its main entities.
Within AXA Investment Managers, Eric leads the Research and Investment
Strategy team and promotes a multidisciplinary approach of Research,
directed toward quality and helping investment decision. Eric has launched the
AXA IM Symposium (Paris 2010, London 2011 and 2012, Paris 2013) which
featured prominent speakers such as Stephen Roach, Francesco Giavazzi,
Jacques de Larosière, Charles Goodhart, Sushil Wadhwani, P.O. Gourinchas,
Stephen Li Jen, Thomas Huertas, Richard Koo, Tim Tacchi, Thomas
Kirkwood.
From 2000 to 2008, Eric Chaney was Chief economist for Europe at Morgan
Stanley, which he had joined in 1995. Previously, he headed the economic
forecasting unit of the French statistical office (INSEE). Before that, he was
responsible for global forecasts and analysis at the French Treasury.
He has been associate professor at the French School of Administration
(ENA). Since 1997, Eric has been a member of the French Economic Council
of the Nation, which advises the Minister of finances. He is an independent
member of the French Tax Council since 2010. He sits on the Scientific boards
of the AXA Research Fund and of the Autorité des marchés financiers (AMF),
the French financial market watchdog.
A former professor of Mathematics and editor of a mathematical journal of the
University of Strasbourg, Eric also holds a Master’s Degree in economics and
econometrics from the Paris Graduate School of Economics, Statistics and
Finance (ENSAE ParisTech).
Eric lives in Paris, is married and has five children.

Glossary
 Backwardation: situation whereby future commodity prices are lower than spot prices
 Breakeven: expected inflation extracted from inflation-proof bonds (also called linkers)
 Contango: situation whereby future commodity prices are higher than spot prices
 Convertibility risk: refers to the possibility that a country member of the euro club would leave the club
 Credit risk: for a bond, risk of default by the issuer (coupon or principal)
 Fair value: econometric estimate of the price of an asset, given economic fundamentals. Despite its name, the ‘fair
value’ is not intrinsic, since it is model-dependent
 Forward rate: expected future short term interest rate (1Y for instance) derived from the yield curve
 Log (MSCI): looking at the logarithm of an economic indicator allows to see whether its growth rate is constant (straight
line), accelerating (upward curved or concave) or decelerating (downward curved or convex)
 OMT: Outright Monetary Transaction, a name invented by the ECB to qualify potential purchases of government bonds
of a country having required financial help from the European Stabilisation Mechanism (ESM). Has never been used.
 Risk premium: premium on top of the price of a financial asset asked by investors to compensate for uncertainties
about the future (default, liquidity condition, counterparty risk, stock market crash...)
 Term (risk) premium: risk premium investors are asking to compensate for the uncertainty on future monetary policy,
given the path of short term interest rates that they anticipate. Comes on top of the geometric average of expected rates
 Surprise gap: A reversal indicator extracted from business surveys (Ifo, Insee, ISM, Tankan...). As for European
surveys, computes the difference between the assessment made by companies on current production growth with the
expectations they were expressing three months earlier, on harmonised data (z-score)
 Yield curve: curve showing the yields of same nature bonds of various maturities, traditionally from 3M to 10Y.
 Zero coupon (yield) curve: for any bond paying annual or semi-annual coupons, it is possible to calculate the price of
an equivalent zero-coupon bond. Doing so all along the yield curve gives a fairer idea of market expectations, especially
in terms of forward rates.
 Z-score: normalised time series: (x-m)/s, where x is the original variable, m its mean and s its standard deviation. The
unit is thus 1 standard deviation.
 5Y in 5Y: five-year yield in five-year extracted from 10Y and 5Y yields of similar bonds (for instance zero-coupon
bonds), considering that the 10Y yield is the geometric average of 5Y and 5Y in 5Y yields. Using both nominal bonds
and inflation proof bonds, it is possible to extract 5Y in 5Y inflation expectations.

60 Eric Chaney, Chief Economist AXA Group, Head of Research, AXA IM60
Recent research from AXA IM
AXA IM research documents are available on: http://www.axa-im.com/en/research
 The important thing is to participate 28/05/2014
In this article, we start by exploring the broad set of labor market indicators that the Fed is looking at to evaluate the recovery in the job market.
 China: continue the economic miracle 22/05/2014
We develop a 2-part report that investigates China's past growth, current problems, and future prospects.
 Credit spreads tight, be selective 30/04/2014
Corporate credit fundamentals remain solid and technical supply demand imbalance remains supportive for credit in both the US and EUR IG space. However, returns
are getting squeezed and, as we continue to tighten in what sometimes feels like a relentless grind to the bottom, the reality is that returns will be weaker this year than
in the past two years.
 Japan: one year on, still in midstream 24/04/2014
We review the effects of the "shock and awe" strategy implemented by the government since it took office and lay out our expectations for the short and medium term.
 US monetary policy expectations and emerging credit growth 17/04/2014
Credit growth in Emerging Asia is more sensitive to expected changes in US monetary policy, since Emerging Asia receives the lions' share in US portfolio flows.
 China: debunking the shadow banking system 03/04/2014
This note on Chinese shadow banking is designed to provide a holistic view of the sector by discussing the structural factors propelling its rise, and how the system
functions and what it contributes to China's overall financial reform.
 Euro area inflation: trough in sight 26/03/2014
In this article, we dig into recent developments in euro area inflation and lay out our expectations for the coming quarters.
 Japanese equities and the yen - An almost 2-for 1 relationship 20/03/2014
The yen has fallen by close to 25% against the US$ since January 2013, with Japanese equities up by 60% over the same period.
 Portfolio diversification and the return of leveraged loans 13/03/2014
Having essentially disappeared during the height of the sovereign crisis, leveraged loans are also making a return in Europe as investors warm to the potential return
and relative protection they offer in a world of rising rates.
 US yield curve: a change on the horizon? 27/02/2014
Our view is that a bear steepening bias will come first, followed by a mild bear flattening to emerge already in the latter part of 2014
 Emerging markets turmoil: 1997-98 redux? 20/02/2014
The duration and breadth of the selloff in emerging markets reminded investors of the 1997 Asian crisis, but the resemblance was hastily denied by market consensus.
We remain more prudent relative to the consensus.
 End of QE: a cross-asset impact assessment 23 July 2013
The first stage of monetary normalisation, QE tapering, should probably start in September, with QE expected to be over by mid-2014.

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 Due to the subjective and indicative aspect of these analyses, we draw your attention to the fact that the effective
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Eric Chaney's Blue Book, June 19, 2014

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Eric Chaney's Blue Book, June 19, 2014