What is in store for Economies and Markets in 2018? Around this time of year, many analysts and fund managers are giving their views. The last time the market consensus was as optimistic as today was shortly before the financial crisis started unfolding. Now, as then, we see a groundswell of optimism: the probability of equities being higher by the end of 2018 is 61%, and that shares will beat bonds is 70%. There is only a 27% chance of a global recession. They are not worried about the prospect of the Federal Reserve pushing up interest rates. There are some red flags within the consensus view. The first is that investors expect volatility (as measured by the Vix index of US stock volatilit
As the US sits down to enjoy a long week-end filled with turkey, stuffing and sweet potatoes, we take this opportunity to sit back and review the market’s performance. Barely a day goes by without Wall Street hitting a new record high. The market has kept marching upwards despite all the headlines about the rise of the far right in Europe (remember?), a North Korean nuclear threat, and natural disasters like hurricanes. One indication why the market keeps rising can be found in the latest poll of global fund managers by Bank of America Merrill Lynch. For the past six years, most managers had taken the view that both inflation and growth would be below trend. Today, however, almost half of a
