October turned out to be a month of relative calm, yet with a positive undercurrent. The central banks are clearly interested in supporting growth prospects sooner rather than later and the latest round of easings should result in a stronger economic momentum.
Lower (geo)political tensions are also contributing to a more hopeful tone with decreased risk of negative headlines related to global trade and Brexit. As growth indicators display some signs of a stabilisation, we find that the risk/reward ratio has improved and therefore raise our stance on shares to overweight.
So far 2019 has been a gloomy year in terms of economic indicators. In all honesty the slow down started already in 2018, a year when central banks, the Federal Reserve in particular, tightened monetary policy. Growth fears as well as the market correction in the fourth quarter last year, however, caused a flip in the aforementioned monetary policy.
This year most central banks have resorted to stimuli, either in the form of rate cuts or through quantitative easings. The risk of weaker economic growth or even a recession seems to central banks be the equivalent of a red rag to a bull. Markets have been riding the central-bank-support wave this year and these seem determined to continue to support the growth perspectives. Will the monetary policy change be enough to neutralise the factors that have weighed on growth?
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