28 May to 3 June: Rolling with the punches

In a holiday shortened week for the US and UK, a veritable smorgasbord of news flow buffeted markets. Our general sense is that two of the most prominent recent headwinds for the market (US rates and the oil price) may now start to cool. With respect to the former, hikes will continue this year, but we believe FED rhetoric may turn more dovish as the FOMC digest the effects of their tightening and the ageing cycle. Indeed, slowing but still above trend growth in Europe is likely to see the ECB pause for thought as well. Similarly, OPEC members seem satisfied with an oil price between USD 70-80 dollars per barrel. This does not mean it is plain sailing; it is now reasonable to conclude that Donald Trump has become a genuine drag on the global economy, indirectly via the uncertainty created by his unorthodox style and directly via his trade policy. Moreover, European politics remains fragile with the surprise change of prime minister in Spain this week, Brexit in the UK and Italy’s unsustainable place in the Eurozone.

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