The global economy is growing moderately, inflation is low, and the monetary policy is loose. This environment supports many asset classes from bonds to equities. The political uncertainty has been absorbed rather well so far too. Will this situation last?
The elections are over. The next President of France will be Emmanuel Macron. This strengthens the camp of the liberal EU supporters. What does this result mean for the capital markets?
Economic growth in the Eurozone has embarked on a clear upward trend. At the same time, the fear of falling wages and prices has disappeared for now. The worries over a possible break-up of the European Union have also eased. Against this backdrop, the ECB President Draghi issued a slightly more optimistic growth forecast yet again on 27 April at the press conference of the European Central Bank. This is another tiny step indicating a possible reduction of the monetary support in the medium term.
The markets were consolidating in March. The global equity index, the spreads for credit risk, and the yields of risk-free government bonds have been going sideways. Before that, the risky asset classes had recorded remarkable price increases, while risk-free bonds had incurred losses. Has the so-called reflation trade, i.e. the positioning towards rising nominal economic growth, come to an end?
The US central bank Fed increased the Fed funds rate last Wednesday. The risky asset markets reacted to the move with an increase. At the same time, the US dollar depreciated. How can that be explained?
It is as difficult to remain invested in a bull market as it is to leave a bear market. After all, investors are risk-averse. Taking into account the four most important categories for the assessment of the attractiveness of asset classes – valuation, liquidity, positioning, and growth – one would conclude that the most important driving factor for the markets builds on the last one.
The first weeks of the new year have already picked up from where the trends that started in 2016 and the hypotheses for 2017 left off: higher growth, normalisation of inflation, increased uncertainty with regard to the effects of Trumponomics, and a gradual end of the loose monetary policy.
What are the topics that will be relevant this year? In commemoration of the fifth centenary of Martin Luther posting his 95 propositions, we, too, want to suggest ten theses for 2017.
We have seen a number of trend reversals this year, one of them being the end of the negative growth surprises. The forecast of economic growth and inflation are currently not subject to downwards revisions any longer. Read more
On Sunday 4 December Italy will be holding a referendum on an amendment to the constitution. This is relevant particularly because in case of a rejection, the political uncertainty would increase.