Time to focus on the opportunities
We maintain our view that the global economy and corporate environment are in good health
2 min read
Global economy should stay strong
Despite the market turmoil that has been hitting the headlines, we maintain our view that the current global economy and corporate environment will continue to support equities in the medium term.
Worries about inflation and interest rates rising faster than expected in the US and the UK were no doubt behind some of last week’s volatility, but there have also been more short-term, technical factors at play.
While this is clearly a concern for investors, it is important to focus on the longer-term fundamentals and the health of the global economy, of which the US plays a dominant role.
A US recession usually heralds a wider sell-off and we do not see one on the horizon this year. We look at a number of factors to assess if such a recession is on its way, including the country’s financial conditions, the profitability of its companies and its position in the business cycle.
All these factors currently show a US economy in good health – and that is good for the worldwide economy.
The stock market falls so far are in line with what we’ve seen before. It was never to be expected that last year’s exceptional performance, without any meaningful declines, would last forever. Last year was very good for equities and US equity markets began 2018 with the strongest January performance in 30 years. It’s therefore not a huge surprise that investors might choose to bank some of their profits.
It’s also worth remembering that we have seen an unusually long period of very low market volatility – something many investors have become used to, making the sell-off seem more unusual than it actually was.
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