Equity strategy and market outlook – March 2019

In this month’s strategy piece, Alastair believes investors are taking a glass half-empty view of the recent dovish moves in US and eurozone monetary policy, which has necessarily been accompanied by meaningful downgrades to 2019 GDP forecasts. However, risk assets globally have rebounded strongly since December and largely anticipated these moves from central banks. In addition, quite realistic market expectations of a continued front-line role for monetary policy in warding off any future downturn may be a confounding factor in interpreting the recent flattening of the US yield curve. Consensus earnings forecasts for 2019 appear to have stabilised, suggesting corporate guidance is already up with the revised economic outlook. The Brexit process remains difficult to predict but the risk of a long delay has increased in recent days. Equity markets appear to be in a holding pattern likely to persist until an improvement in the economic data, while merger and acquisition activity may be incentivised by falling credit costs.

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