The stock market correction of February and March already feels a long time away and most investors with globally diversified multi asset portfolios should by now have seen a return of positive returns for 2018 (at least that’s true for Tatton’s portfolios). Despite the more amenable return environment, the ease and general optimism of 2017 has not returned to capital markets.
Initially this was caused by the fear that rising rates and bond yields would upset the fragile process of capital market normalisation. This was quickly followed by concerns that the general slowing of global economic growth is heralding the end of the ongoing, very long economic cycle. As summer has arrived, the only element that remains – based on economic data evidence – is a weakness in emerging market economies, driven by a US$ funding squeeze due to the mass repatriation of US overseas earnings following the tax reform.
With the slowing gradually turning into re-acceleration and central banks as well as bond markets continuing to behave sensibly, all could be well if it wasn’t for the increasing trade tensions. Trump’s threat of an escalating trade war at the global level and the prospect of a disorderly Brexit on a regional level.
