Economic and Strategy Viewpoint - January 2018


Page 3: 2017 review: the dog that did not bark

  • We look back at a year full of political noise which ultimately was not enough to suppress ebullient asset prices.
  • Emerging markets perhaps suffered more from political risk than their developed counterparts, but still delivered the best returns on aggregate in a strong year for equities.
  • Despite the lack of a political crisis, we think 2017 still showed that politics can and does matter. Relief rallies as tail risks failed to materialise provided evidence of this

Page 14: Themes for 2018

  • We highlight three themes in 2018. The first is “Goldilocks gives way to reflation” where stronger growth and higher inflation replace the market-friendly combination of low inflation and robust growth seen in 2017. Second, is “The long farewell: the end of QE” where we highlight the forthcoming withdrawal of global liquidity. Third is “The return of political risk” where we draw attention to the US mid-term elections which may return Washington to gridlock.
  • All three themes strike a note of caution for equity and credit markets in 2018, but investors may be focused elsewhere so by popular demand we have added our thoughts on bitcoin.

Page 20: Views at a glance

  • A short summary of our main macro views and where we see the risks to the world economy.

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