Wednesday, 21st August, 2019

It’s getting a bit panicky. Investors are now starting to price a real risk of global recession. Economic data hasn’t been too bad, although last week’s Chinese industrial production falling to the lowest annual growth rate since 2002 raised a few eyebrows. It’s more about the politics. The US-China trade war could get worse before it gets better. The chances of a hard-Brexit are growing by the day. Add into the mix tensions in Hong Kong and the Argentine crisis and it’s not hard to see why markets are nervous. The MSCI World Equity Index is now down 6% from its recent highs, risk aversion indicators are rising, safe-havens are back in demand, and suddenly everyone’s talking about inverted yield curves (see below). Economic data will remain in the backseat. It’s all about stocks and tweets at the moment.