Wealth Management: Market Perspective – Bondstock | UK consumers: ready for Brexit? Foreword

Kevin Gardiner, Global Investment Strategist, Wealth Management

Fifty years after Woodstock, global bond markets have been staging their own summer of love. Traditional inhibitions - such as positive yields - have been cast to the wind as more conservative onlookers have struggled to make sense of it all and wondered who'll clean up the mess.

As in 1969, organisation has been lacking, more people have showed up than planned, and all they've had in common is the expectation of a good time. 

Then, of course, what came next was Altamont - and the seventies… In this back-to-school Market Perspective, we offer our thoughts on the likely significance of Bondstock. Falling yields and inverted curves are credited with near-mystical forecasting powers, but while economies are cooling and trade and geopolitical tensions have risen, we don't yet see a major economic accident looming. Nor do we yet see a material revival in inflation, monetary irresponsibility notwithstanding. And we do still think that an uncertain future needs to be - and one day will again be - discounted. 

It's probably just kids having a good time.

We also take a quick look at UK consumers as Brexit risks loom. They have not been as well-behaved as their US peers in this cycle, and their excesses can be seen in a current account deficit that is (even) bigger than usual. That said, we doubt confidence and spending power are about to suddenly collapse - and UK-oriented stocks have already underperformed markedly since 2016, suggesting some risk is in the price.

Just when you think it is not possible to exaggerate the dysfunctionality of British politics, our pundits rise to the task. But remember that a noisy public debate does not always translate into noisy portfolios.

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