We don’t think 2018 is going to be the End of the World. There will be opportunities and mistakes. Winners and grinners, and more than a few losers. Sure, we’re looking forward to the new MiFID regime – isn’t everyone? (US Readers…..)
Our broad brush picture is a continuation and acceleration of the Global Macro Alignment theme – a stronger global economy, cautious normalisation, continued upside for risk assets (stocks and alternatives), but a negative outlook for the bond markets with rates set to rise as Central Banks pull back from distortion. They will remain nervous about financial market instability.
If things wobble, them my personal view is the High Yield market is where we will see the most dramatic losses start in bonds. We still see a strong chance of equity market correction – and will buy into it because the global economy is expanding. Our big Macro Threat for the coming year is resurgent inflation – how quickly will it mount and will it take out market sentiment.
The devil is in the detail. We’re positive across all the developed economies and expect to see growth expectations raise. Although the US, UK and Europe will be moving into Normalisation with tightening, while inflation remains sub 2% Japan will continue its ZIRP (zero interest rate policy) which is massive yen negative and therefore stock positive – my Japan-watching macro man Martin Malone is calling for further massive gains in Japan Stocks.
This post was published at Zero Hedge on Dec 15, 2017.