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23 March 2018

Market declines: US LIBOR or US trade war?.

Headlines scream trade war while a surge in US LIBOR is tightening US financial conditions

It is very easy to point the finger at US trade sanctions against China as a reason for the recent declines in equity markets. The prospect of a near-term confrontation, in respect of access to markets and IP protection (a free competition zone perhaps rather than a free trade area), is clearly unhelpful for global equity sentiment. China’s transition from a catch-up nation to an economic competitor always had to be resolved at some stage. However the second dynamic at work during Q1 18 is a rapid rise in US LIBOR, over and above that of official US interest rates. This is tightening monetary conditions rather faster than policymakers may have intended.

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11 August 2017

North Korea: A problem not of Trump’s making.

Missile development program slowly shifts the political balance

North Korea’s recent successful test of a missile capable of reaching much of the US mainland is clearly a concern but it is not because such an attack is imminent or likely. The history of military rocket development suggests that it will still be some years before North Korea could be assured of a successful, let alone multiple, strike on the US or even Guam. However, in the event of any attack, the overwhelming superiority of US forces would undoubtedly ensure the destruction of North Korea. Therefore in many respects Trump’s most aggressive comments this week were a statement of the obvious and investors should accordingly not over-react, even as volatility has risen during thin trading over the holiday season.

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RSS - Strategic Insight
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*Multiple Sectors
17/01/2019
Equity strategy and market outlook - January 2019

In this month’s strategy piece, Alastair George believes that investors should avoid the temptation to sit back and spectate in Q119 as a prudent degree of risk-taking may be a better strategy. Valuations now offer a more attractive entry point for both developed and emerging equities while US monetary policy has largely normalised and we are past the inflection point in terms of interest rate increases. For US/China trade, a truce in 2019 could clear the way for Trump’s re-election in 2020 while in the UK, the chances of a delay or revocation of Article 50 are rising faster than that of a chaotic no-deal Brexit. Sharply declining survey data and continuing profits downgrades (even if profits growth still remains positive) are, however, two key counter points to the bullish argument. Nevertheless, a major slowdown in 2019 remains less probable than a soft landing at this point and global equity allocations should be at least at neutral rather than cautious, in his view.

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