The GISG has maintained its position at slightly underweight, or modestly “risk off”. This primarily reflects the near term concern that investors have not fully priced-in the normalisation of monetary policy which in turn is consequent upon the positive economic outlook. Simmering commercial geopolitical tensions can only amplify anticipated market volatility.  


However the team expects that there will be a favourable outcome in both cases – there will be no developed market monetary policy “mistake” and concerns over the US’s aggressive trade stance will abate as counterparties seek appeasement over war.

Rationale – looking beyond the volatility


Despite these risks, the GISG’s central case remains therefore that, driven by a supportive economic backdrop, owning risk assets will be rewarded relative to owning cash or fixed income over the next 18 months. Further sharp falls in equity markets could see us move quickly to a more positive risk stance.




  • The world is enjoying synchronised growth in all of its key economic blocks.
  • This is supportive for strong (double digit) corporate profit growth.
  • The fiscal policy tide is turning stimulatory at the same time that the global growth engine is firing strongly.
  • This is most notable in the US, where spending on infrastructure and defence is projected to increase the annual budget deficit from 3% to 6% over the next two years.
  • Europe is also looking to push on past the austerity of the last few years.
  • However financial market volatility has increased as investors fear a policy mistake.
  • At a minimum, diverging global monetary policy will result in increasing currency volatility.
  • The Trump risk premium still justified – nonetheless, while a trade war is a concern, ultimately we think this will not turn out to be a big deal. China has the political willpower to outlast the US and relies less upon US demand than most believe.
  • Equity valuations are not an impediment.
  • All else being equal, we will be looking to take advantage of any weakness to buy assets at reasonable valuations.

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