Granted, the possibility of a Brexit is a good reason to take risk off the table, but it is by no means the only risk out there, indeed,it is one of many.
Once Brexit and the US elections are over, markets will begin to look ahead toward the election cycle in Europe more broadly and the implications of growing extremism across the region for the European project as a whole. And, if that were not enough all of these geopolitical worries are set against a backdrop of concerns about global growth more broadly.
As Moody’s pointed out on Thursday: “The financial markets volatility from earlier in the year has abated but it showed that the risks of weaker growth scenarios have become more tangible. The global recovery has weakened further and prospects across countries remain uneven and generally weaker than over the past two decades. In addition, global trade remains subdued, while spillovers from emerging markets shocks to financial markets globally have increased substantially.”
Schroders chief economist and strategist, Keith Wade makes a similar point saying 2016 is likely to be the fifth year wherein global growth disappoints initial expectations.
And, while Wade is of the view that growth is likely to be a bit better than 2015, he said the reason for the disjuncture has a lot to do with the aftermath of the global financial crisis.
“It is taking a long time for households and companies to adjust to the new environment; it is taking emerging markets a long time to adjust to this new environment so there are continued pressures that we continue to see.¨
If this is accurate then the only thing that does seem to be certain is that volatility is going to remain and, probably get higher as expectations and disappointed yet again.
Arguably, everything in this cycle has taken longer than people expected – both on the way up and the way down – and very seldom have the various parts of the cycle moved in the ways we have come to expect.
Which is of course where the patience and the tactical manoeuvrability come in. Where it becomes more of a problem, however, is if one is waiting for a return to a normal that no longer exists, in which case one runs the risk of being counted out.
