As we’ve highlighted over the past few weeks, it is a busy end to 2017, with political event risk all the way up to Christmas. Over the weekend, we had the second round of the Chilean elections, with market friendly candidate Pinera triumphant and ANC elections in South Africa, with results due this morning. There was also a victory for the Modi government in Gujarat. This week has the potential to deliver US tax reform. There is also a BOJ meeting in Japan.
Looking into 2018, it is likely that central bank liquidity will start to tighten (in aggregate) for the first time in a decade. Given also flat yield curves, tighter labour markets and expensive valuations in developed markets, there is much more potential for volatility than in 2017. We continue to view emerging markets as relatively more attractive, given cyclical positioning, structural growth and value.
The global market update now takes a break and will return on the 2nd January 2018.
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