Market Flash: Low-Volatility Records
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On the markets
Equity market trading was thin amid fresh low-volatility records. And yet global news flow was substantial and included the threat of Spain disintegrating, more noise and fury over North Korea, Turkish troops moving into Syria and Washington’s decision to question the US agreement with Iran over nuclear developments. There was also Washington’s announcement that the US was leaving UNESCO. Even so, markets only had eyes for two angles: 1 – so far, macroeconomic factors have suggested the economic cycle was continuing and that earnings would rise everywhere in the world. In addition, hope of US tax reform has revived. 2 – central banks are expected to move towards tightening but carefully so as not to slam the brakes on the cycle. At the same time, oil prices and the US dollar are trading within narrow limits. This means the environment is still upbeat for equities, especially in Japan and in the eurozone where relative valuations strike us as cheaper than in the US. As for bonds, investors should remain highly tactical even if the environment is not expected to suddenly deteriorate sharply.
