The environment on the financial markets has become a bit bleaker. Growth rates of industrial output and the survey-based indicators for economic growth are falling, while the trade conflict between the USA and China and the tense geopolitical situation in the Middle East has caused the risk for global growth to increase further.
The current environment is very positive for the capital markets: strong growth, low inflation, supportive monetary policies, good earnings growth, and low volatilities, i.e. fluctuations. Also, the numerous risks have not had a significantly negative impact on prices. However, the phase of rising prices started as early as March 2009. This environment implies that any change in the relevant parameters such as growth, inflation, and monetary policy would be tantamount to deterioration, given that improvement is not possible anymore. The most important question asked by investors at the outset of 2018 is therefore whether this positive environment is still here to stay.
We are almost approaching the end of the summer but it looks like we are back to April 2015 in Turkey. The election outcome and aftermath did not work as politicians had desired and the efforts to form a government have failed so far.