Chart of the week: Eurozone needn’t fear ‘Japanification’

A deflationary bust is unlikely

Europe’s persistently positive inflation expectations, and the appreciation of real assets such as property, stand in stark contrast to Japan’s protracted deflationary bust of the 1990s. Nevertheless, Europe’s well-known structural weaknesses are now combined with cyclical malaise, and that leaves the region vulnerable to an external shock — most likely to originate from China. This begs the question that if the eurozone does fall into recession, would it drag US or global economies with it? And, getting to the crux of the matter, would it cause a widespread bear market in risk assets? Read why we think such fears may be overblown in our latest Investment Insights

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