Risk assets better placed than bonds
The global economic upswing has been long but shallow and inflationary pressures remain subdued. This creates a fertile environment for risk assets.
But while we expect equities to perform reasonably well with corporate earnings continuing to grow, even against the headwind of rising interest rates, we fear that government bonds and corporate credit may be vulnerable as the unprecedented central bank stimulus is wound down.
Global tensions on the rise
While our overall economic view remains upbeat, we concede that there are clouds on the horizon. The US Federal Reserve (Fed) is currently raising interest rates, as are other central banks. We are also witnessing an escalating trade war between the US and China, which is straining relations between the world’s two most powerful nations. Elsewhere on the geopolitical stage, we look on with unease as Brexit and a surge of nationalism threaten the established order in Europe.