After a prolonged period of very benign markets, the environment is turning more challenging, as we predicted in our 2018 Outlook. With the outlook for monetary policy getting more uncertain, we are likely to see volatility rising with more frequent and deeper setbacks in risk sentiment.
Market Perspectives March 2018
Global View highlights
- Goldilocks are getting tested: Rising inflation and toppish economic sentiment make both fixed income and risky assets vulnerable to setbacks.
- The ongoing repricing of central banks’ policies leaves Fixed Income assets in the firing line.
- We still expect euro area equities to deliver positive returns this year, but acknowledge growing risks from rising volatility. Both EA stocks and bonds have delivered negative returns year-to-date; such poor performance and positive correlation could cause further de-risking in the near term.
- Euro area corporate bond spreads (especially IG) and EM assets (especially currencies) have shown
resilience. Dollar weakness and ECB buying should offer further support there in 2018.
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