MARKET UPDATE – September 2019
It (still) remains difficult to see how the ongoing trade friction between the US and China, Brexit uncertainty and geopolitical
risks in the Middle East is a positive for economic momentum, despite the apparent willingness of central banks to ease
monetary policy. Given the extraordinary rally in equity markets since the beginning of the year valuations remain unattractive,
particularly given ongoing downgrades to earnings estimates. Overall, this makes risk-reward unfavourable.
Medium term the only area of apparent support for the global economy in the form of dovishness from central banks, but as
ECB President Draghi acknowledged at the last ECB meeting, there is a limit to the effectiveness of monetary policy. It is worth
reiterating that the market rally in the first half of the year was predicated on a second half revival of economic fortunes globally,
and a subsequent turn in earnings expectations. We are now well past the mid-point of the year, economic data remains weak,
earnings estimates continue their downtrend but still look highly optimistic.