22 to 28 January: Hold On If You Want to Go Faster

To repeat our message of these first few weeks of 2018: we believe the gang-busters rally we have seen so far this year in equities is of a different flavour to that which preceded it over the prior 18 months. The strength and breadth of global growth, which this week helped propel WTI oil to its highest level in 3 years (above USD 65), is starting (slowly) to catch the attention of fixed income markets (US 10-year yield at a 4-year high, US 2-year yield at a 9.5 year high). In this sense, growth is starting to sow its own headwinds, with a more widespread monetary tightening likely on the way as the year progresses. Indeed, this is exactly what a weaker dollar is telling investors; expectations are rising that it will soon not just be the FED raising rates. However, this week, central bankers did their best to maintain the status quo – both the ECB and BOJ arguing that it is too early to normalise policy for now.

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