Policymakers haven’t saved the day

We think the assumption in markets that looser policy in the US and China will revive the global economy before very long is too optimistic. We are forecasting further weakness, regardless of whether a trade deal between the two countries is ultimately agreed, or talks break down entirely. That is why we think that the prices of equities, and other “risky” assets, will fall a lot further later this year. Meanwhile, the likely response from central banks underpins our view that “safe” government bond yields will continue to decline. Finally, we suspect that haven currencies, like the US dollar and Japanese yen, will strengthen as global growth disappoints.