A Chaotic Start To 2019
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Market flash
In the last 3 months, the prospect of less central bank liquidity, the risk of a hard Brexit, Italy's budget conflict and the ongoing trade war have all conspired to make markets lose their bearings. The uncertainty has ended up weighing on company momentum and probably on global economic growth. Earnings estimates will definitely be revised lower even if we see no recession in 2019. All these risks could materialise but we believe the market correction has gone too far. Inflation risk has evaporated due to sharply lower oil prices, a development that will also boost purchasing power. As a result, we remain upbeat on equities but a short term rebound only seems possible if Theresa May succeeds in getting her Brexit plan approved by Westminster next week and if the US and China reach a trade agreement in the coming weeks. In the meantime, with Bund yields down to 0.17%, government bonds are acting as a temporary, and probably dangerous, safe haven.
