As September and Q3/2018 drew to a close, investors enjoyed a second consecutive week of positive returns, ending the period not only with positive returns overall, but also in an uptrend. This must have been all the more confusing for those who follow politics more than the economy and capital markets. In the UK, the volume of the domestic Brexit debate is gradually rising to a crescendo, in Italy the populist government agreed on a near doubling of the budget deficit which was met with disapproval from the EU and finally the tone between the US and China over the trade conflict deteriorated to the ‘not-talking’ level.
Cynics argued that stocks only rose because in light of rising inflation, investors shunned bonds and cash which only left equities as the least worst option. While there is some truth in this, it is nothing new. Not even that the US central bank, the Federal Reserve, raised rates again and for the third time this year to now just over 2%. The real news was that the US rate setters dropped the word ‘accommodative’ from their accompanying notes that describe their monetary policy.
