After a volatile first quarter, investors appear to have calmed during the last two months. However, the problems that caused the turmoil at the start of the year have, if anything, become more acute. China’s growth continues to slow, the political risks presented by the US election and the Brexit referendum have become critical and the Federal Reserve’s guidance on interest rates is increasingly unreliable.
Since the global financial crisis, markets have become more susceptible to nervousness, with the average time between peaks of anxiety, as shown by market sentiment, shortening from nine to three months. This ‘new normal’, aggravated by the macroeconomic concerns discussed, means that markets remain at a precarious point.
Our current views are as follows: