On one side we have a global economy which is slowing after many years of solid growth. China is in the middle of long term transition which creates immediate headwinds for economic growth. The United States (“US”) is growing at a reasonable rate, however recent economic data has been “patchy.” A slowing global economy means lower company profits, which has been reflected in lower equity markets since the turn of the year.
On the other side we have global central banks diligently fighting against any slowdown. Central banks remain committed to low interest rates and other forms of stimulus to make any slowdown manageable. These policies are also designed to kick-start future growth.
This battle means another year of equity market volatility. Markets will remain skittish around economic data released from China and the US. Similar reactions are expected around meetings and announcements from global central banks. Investors should try to avoid this short term news flow and volatility as it is largely “noise” in the context of a long term investment strategies.
As always, we will continue to monitor international events and provide you with an interim update should a material event occur which impacts your investment portfolio.