The market movements observed for the main financial assets since the start of the year belie both the trends in place at the end of 2016 and the generally optimistic forecasts around at that time.
Can this consensus, which continues to hold firm, be shaken? Following the election of Donald Trump, the consensus had coalesced around the theme of reflation and its corollaries: higher US yields, overweighting of cyclical and bank stocks, dollar appreciation, underperformance of emerging markets, etc. A month later, most of these expectations were contradicted by the financial markets, with the dollar tumbling and emerging market equities rising at a time when their developed country counterparts were, at best, treading water.
No more than a pause after the sharp year-end swings or deeper doubts over the trend seen in recent months?
On the one hand, the macroeconomic data are still upbeat in the US, as well as in Europe and China, while thus far, corporate earnings remain on track – all of which is reassuring and limits the potential for a market reversal.
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