On Tuesday, December 4, the S&P500 fell by 3.25%, following an equity market swoon in Asia, as investors struggled to make sense of the US-China trade deal. This comes after a 6% rally in the S&P500 over the preceding six days, when it had seemed all was sweetness and light between presidents Donald Trump and Xi Jinping.
But suddenly investors are worrying they had misread the signals – and not just about trade. They are also concerned that falling long-term US treasury yields and a flattening yield curve are harbingers of recession in 2019 or 2020.
For our part, Euromoney isn’t sure these are the right things to worry about.
When we were young, this was the kind of volatility you saw in illiquid emerging markets that made you question the validity of any mark-to-market pricing. Rather than worrying about what ‘Tariff man’ tweets next, it would seem to us a better question for investors to ask is: By what possible definition the developed equity markets still count as an appropriate venue for allocating their funds?
Place your bets
Instead of weighing up the prospects for value over growth or industrials versus financials, they might be as well advised to take a view on the fifth horse in the sixth race at Ayr.
