Carmignac's Note

The imbalances that have built up of over the past ten years raise major adjustment issues

Detailed market predictions are only of limited value.

A year ago we called the start of a global economic recovery (see Carmignac’s Note of December 2016, “The wind is picking up”).

“Capital flows back into the eurozone should partially protect European equity markets against bond risk and strengthen the single currency”

The summer of 2017 saw no external shocks powerful enough to test the robustness of financial markets.

Investors have remained optimistic, both because they believe the global economy is still growing at a decent clip (though things look a bit shakier of late in the United States) and because they have lost none of their faith in the wisdom of central banks.

The French election didn’t deliver the deathblow to the European integration process after all, which means that financial market exuberance can be expected to hold up for a while.

The British equity market has gained 20% since the referendum on 24th June resulted in favour of Brexit. The S&P 500 is up 9% since Donald Trump was elected President of the United States.

After observing that every new political twist and turn in 2016 fed into a gradual drift towards fiscal interventionism and prompted central banks to reaffirm their accommodative monetary policies, the financial markets have since been having a field day with what is clearly the strongest cyclical recovery since the end of the Great Recession.