Bear shock warning

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The Fed is on hold aer taking steps to make sure it avoided a policy mistake. At least that was what the markets were telling the Fed in December. Since then, risk is back on as the first phase of monetary policy normalisation in the US has come to an end. Policy is as neutral as it has been in over a decade. By not going any further, the Fed has allowed the markets to bounce and I expect the next several weeks will be a journey to re-testing the valuations that were prevailing before Q4 of last year. That is, of course, unless the economic data really does fall off a cliff. So far so good on that, with the US labour market still generating jobs. Yet the global economy still has a trade crisis, a slowing China and potential regional disruption in Europe to deal with. We know from December what a bear-shock looks like. That should be a sobering thought for investors in 2019.