At the beginning of 2018, we positioned more cautiously for markets caught between headwinds from the end of QE and tailwinds from positive growth. This is what happened so far and what we expect from the second half of the year:
Financial markets have underperformed the economy. Growth continues to be positive, with upward momentum in the US and fading momentum in Europe and EM. However, without central banks as marginal buyers, financial assets have moved lower. One by one, QEsupported carry trades in rates, credit, FX, volatility have re-priced. Markets continue to appear fragile, as we highlighted in our last Silver Bullet │ The Age of Fragility.
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