Insights

Global equity markets rallied throughout 2017 without any major setbacks. With volatility at extreme lows, it could be said that 2017 was an unusually fortunate year for market participants in terms of risk and reward.

Trump imposed USD50 billion in tariffs against China with USD200 billion still pending and more in the pipeline to effectively cover all imports (USD450 billion) from China.

“If in doubt, add more credit” seems to have become the global mantra or ‘solve all’ policy recommendation for the last 10 – 20 years.

Financial markets continue to come to terms with a more protectionist and less globalised world. The surprise perhaps is not that tariffs have finally been imposed by the US on its trading partners, but that it took so long for a key campaign promise to become reality in spite of Republican control of the House, the Senate and the White House since November 2016.

In the past few years, Turkey has faced some of the most monumental challenges in its recent history.

In March 2018, Bloomberg announced a conditional decision to include Chinese bonds in its flagship bond index: Bloomberg Barclays Global Aggregate, starting from April 2019.

The MSCI AC Asia ex Japan (AxJ) Index fell by 4.8% in USD terms amid persistent concerns about trade tensions between China and the US.

In June, the US Treasury (UST) curve flattened. The US Federal Reserve (Fed)'s 25 basis points (bps) rate hike was accompanied by a more hawkish tone, supporting higher short-term rates.

It may seem an optimistic view, but conditions seem to be shaping up for some major trade compromises relatively soon.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Global growth is becoming increasingly less synchronized, with the Eurozone, Japan and UK showing an ongoing moderation in growth, whilst the US remains robust.

It seems that China does not wish to compromise with the U.S., but neither does it wish to retaliate strongly to the $200BB of additional tariffs. Since it does not wish to “lose face” in giving this light response, it is putting a positive spin on its actions by saying it wishes to be the leader of the free trade movement.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

The Japanese equity market was mixed in June, with the TOPIX (w/dividends) falling 0.76% on-month and the Nikkei 225 (w/dividends) climbing 0.65%.

Our London-based Emerging Market fixed income portfolio manager provides an update for Latin American markets in the midst of a hectic election schedule. Despite the risks, pro-market reforms should still progress to varying degrees across the region.

There is currently much talk within the financial markets of the ‘new PIGS’, a group of countries which are widely viewed as having inflated property markets and notably elevated levels of debt that are therefore likely to prove vulnerable to the tightening in global (banking system) liquidity trends.

Uncertainty surrounding Trump policy has reached new highs with global trade wars back on. Steel and aluminium tariff exemptions have been allowed to lapse for Canada, Mexico and Europe, and USD 50 billion in new technology-focused tariffs against China will be detailed by mid-June and imposed shortly thereafter.

Considering the unique profile of the market and how much China influences the global economy, a decision about China could be the most important call an investor can make at this time.

The MSCI AC Asia ex Japan (AxJ) Index closed -1.3% in USD terms as markets turned more risk averse amidst macro uncertainties, trade tensions and higher oil prices.

In May, US Treasury (UST) yields ended lower. A solid US jobs report supported the bearish bias in UST yields that prevailed.

The ECB recently celebrated its 20-year anniversary and instead of a birthday cake, DB research released a compelling chart about how different asset classes have performed over this time period.

Despite uninspiring global equity performance in the last three months, at least for USD-based investors, Nikko AM’s Global Investment Committee continues to be positive on global equities on a one-year view, particularly those in Japan, Europe and the Asia Pacific, but remain unenthusiastic on global bonds.