Global manufacturing is undergoing a slowdown that, for now, is not spilling over to the rest of the economy. But any escalation in trade tensions could edge the global economy closer to a tipping point. As things stand, we have yet to see any signs of a forthcoming recession.
Expectations for lower interest rates are very high and if global uncertainties recede then a return to more normal levels will weigh on bond yields. Equity markets currently offer record-high risk premia compared with other asset classes, more than compensating for the associated risk. The economic environment could turn out to be favourable for equities, but flexibility remains the key to dealing with uncertainty.
See also : World | Economic outlook S2 2019
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