Capital markets have yet to enter into an early festive spirit. The first week of December made for a bad start in risk assets. As we have written before, expectations of future US-China trade relations are vital to market sentiment – and this week we saw a blow in that regard. President Trump indicated that a trade deal between the world’s two largest economies might have to wait until after the presidential election (November 2020). Markets on the other hand (when judged by equity valuation levels vs. actual profit growth) have effectively priced in a deal in the next few weeks or months.
That disappointment will sting, given the current economic backdrop. We wrote last week that markets appear to be ‘frontrunning’ the economy by pricing in a more imminent recovery from the global economic slowdown than the economic data flow currently suggests. Equity valuations have risen close to where they were during the heady days of late 2017. Sure enough, stock markets around the globe fell 2-3% at the beginning of this week – testament to the fact that investors are feeling a little nervous about their optimism.
Tatton Asset Management PLC (LON:TAM) offers a range of services to directly authorised financial advisers in the United Kingdom. The Company provides on-platform portfolio management, regulatory, compliance, and business consulting services.