Global Investment Views - November 2018

Thursday 25 October 2018

Global Investment View

The late cycle narrative behind the autumn market malaise

The start of autumnmarked a change inmarket dynamics. Volatility is up across the board, the US 10-year yield is flirting with its highest level over the last seven years following a rapid rise; equitymarkets are under pressure. After a period of highly divergent forecasts, markets are starting to price in a synchronised slowdown in global growth, and, hence, the fact that the peak in earnings acceleration is progressively shifting to being behind us. Some ongoing dislocations are accompanying this new situation. Cumulative hikes in interest rates in the US, while limited in absolute terms, have been sufficient to trigger the early stages of a risk-off positioning in emergingmarkets which have recently been negatively affected by idiosyncratic stories (Turkey, Argentina) with weak fundamentals. The risk-off sentiment has been further exacerbated by the Italian budget situation, while the most recent risk-off moves have also broadened their effects to the US in the tech area, which is very stretched in terms of valuations.

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