In this paper Lombard Odier explains that over the past few years, global economies have gone through a major transition. Lombard Odier expects lower potential growth in the coming years due to deleveraging in the US or/and Europe, demography and productivity. Lower potential growth implies that the output gap is smaller than it seems, a lower equilibrium level of yields at the long end of the curve, lower returns on capital, structurally higher asset prices, higher bouts of volatility and the correlation amongst assets could tend to be higher.
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