- Markets are returning to more normal levels of volatility
- The macroeconomic landscape remains supportive, and even though developed world growth is easing, it is still robust
- Rising volatility means it is important to be more selective in how you take risk; and active security selection could provide additional value
- In our opinion, we are at the beginning of the end of the current economic cycle
The start of 2018 has been anything but ‘business as usual’. Markets were buffeted first by inflation concerns and then trade protectionism. Equities fell and bond yields rose significantly as a result. So is it the beginning of the end for this long bull market cycle or is it the end of the beginning? We think it’s the former. Although we are sanguine about macroeconomic fundamentals, they are starting to peak and roll over. From now, markets could see more divergence between sectors and asset classes, indicating that investors may be best served by taking a more discerning, nuanced approach, away from the ‘beta trade’ of simple market exposure which has worked well until recently.
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