Crucial week ahead
The next week could be hugely influential for the rest of the year so it’s hardly surprising to see markets trading a little flat to kick things off.
Investors are heading into this period in a buoyant mood, with US markets back in record territory and global stocks having enjoyed a very good week.
Central banks have done their part in supporting the rally, with both the ECB and Fed last week clearly indicating that stimulus is just around the corner, much to the relief of investors that had assumed so much. Whether they’ll both follow through on these suggestions though may well depend on how this week goes.
The G20 at the end of the week is what everyone will be focused on in the coming days, with the trade war between the world’s two largest economies representing the greatest risk to the global outlook.
While both sides appear keen to give the impression that they will take or leave a deal, I think it’s quite clear that it’s in both their interest – and everyone else’s for that matter – to find common ground and end this now. More tariffs will only hurt growth more and increase the need for central banks to play a more active role.
Expectations at this moment are relatively balanced. If both sides can agree to restart talks and work towards a deal while not implementing any further tariffs, I think investors will be relieved.
In fact, from a markets perspective, you could even argue that this is the favourable outcome as the Fed and others would likely then follow through on cutting rates, which may not necessarily be the case in the near-term if the meeting goes better than expected.
