With expectations for global earnings making new highs, and the recession fears with which we began the year all but forgotten, it might be tempting to transpose a similarly rosy outlook onto markets.
But markets are more than mere mirrors of the economy. To our mind the recent faltering in many risk assets is not just (as it is being dismissed in some quarters) a localized nervousness surrounding elections in France. It marks instead a drying up in the very factors which were the source of markets' strength.
As ever, the outlook remains complex: it is not impossible that such concerns are simply shrugged off, and that flows and momentum carry all else before them. But we think the outlook for risk just darkened considerably - and rate cuts will do little to revive it. Our H2 outlook presentation explains why.
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