While more sanguine on the threats poised from China and the recent falls in oil price, Wade said his greatest concern from a volatility perspective comes from across the pond in terms of interest rates.
“We see some complacency in market expectations about the degree of tightening by the Fed,” he said.
“We would certainly put more weight on a fiscal stimulus next year than the market given the political pressures for the Republicans to deliver ahead of the mid-term elections. Consequently, alongside a fall in the oil price, tighter policy from the Fed has the potential to trigger an increase in financial market volatility.”
Meanwhile, despite political tensions easing in Europe, Wade said the next shock to markets could still be geopolitical in origin. The points to rising political risks in Asia, where he said tensions between the US and China will rise if North Korea does not ease back on its nuclear weapons programme.
Despite concerns of complacency, Wade notes that markets are not entirely ignoring the risks. He cites the strong performance of gold – the ultimate safe haven asset – and a rotation in equity markets away from cyclicals and back toward the high quality dividend payers as evidence of this.
