The wait for Godot, or the global economy, continues. While we see some signs of a stabilisation, we continue to question the potential for an acceleration. The trade war and its secondary effects are definitely in play, and this is particularly true in Asia/China but also in Europe where the problems in the manufacturing sector persist. In short, the global economy is treading water at the moment and the expected recovery during the second half of the year hasn’t materialised yet.
The counterweights to the trade and geopolitical risks in this scenario have been the central banks. This is particularly true for the U.S. Federal Reserve (Fed). The changed stance in December last year was followed by a strong signal in June that the Fed is ready and willing to support the economy. Consequently market expectations are high, almost four rate cuts in the coming 12 months have now been priced in – beginning in July. As risky assets have had a great journey this year the market is obviously relying on the ability of the central banks to sustain the economy and the cycle.
Explore the July 2019 edition of the Global Asset Allocation Strategy (pdf, 1 MB) for more information.
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