Since our last note to you in July, a number of things have changed that could affect the outlook for markets. Although we continue to believe in our views where we see the potential for positive returns in certain markets, such as equity markets, some of the risks have increased. A series of political events have dictated market moves this year and the past few weeks are evidence of this.
The Turkish crisis, fuelled by a political dispute between Turkey and the US, threatened to destabilise the Emerging Markets even though Turkey contributes little to the global economy. Although the markets have calmed, there is a risk this could escalate again as President Erdogan does not look like he is ready to back down.
We have mentioned the trade tensions between the US and China a couple of times this year and that we did not think it will escalate into a full-scale trade war. Some tariffs have been applied, although they are so far negligible in the scheme of things. Clearly, President Trump has demonstrated that he is unpredictable and whilst we continue to believe he is a deal maker, the threat of further tariffs is possible. Recent news suggests trade talks will resume this month.
These events are affecting the Emerging Markets/Asia more than any other. A resolution to these political events will be positive for equity markets, but a deterioration will add pressure and could hurt business sentiment which could, in turn, affect global growth.
It is also worth mentioning the ongoing Brexit negotiations and that the odds of a no deal outcome are increasing. This could potentially not be good for parts of the UK and European equity markets.
At this stage, we continue to be positioned for a positive outcome on growth and trade. We are monitoring these situations and may look to act to any deterioration by raising some cash in our portfolios and reducing our exposure to the region’s affected. We will be in touch as and when we feel the situation necessitates it.
If in the meantime you have any questions, please do not hesitate to contact us.