Fears of rising interest rates are back. Was the recent 9% correction in global equities just a market blip, amplified by technical factors related to the trading of volatility products? Or something more serious – a regime shift signalling the end of the equity bull market as many have argued?
Capital markets recorded a positive year of 2017. The performance of the various asset classes was of the textbook variety: the higher the risk, the higher the return. At slightly more than 1%, even low-yield asset classes such as euro government bonds or US Treasuries (in USD) posted positive rates of return1). This came as a surprise seeing that many experts had expected higher yields for government bonds, which would have come with negative effects on prices.
2017 is drawing to an end, and the bottom line is positive. The outcome is significantly better than we had expected. Since the financial crisis in 2008, the global economy has never expanded more quickly and especially concertedly than in 2017. Also, inflation has surprised on the downside, falling short yet again of the expectations held by central banks and analysts.