The reconciliation between markets and central banks. This is it – second Alessandro Fugnoli, strategist of Kairos – the dominant factor in the world of finance in this first phase of 2019. In the last episode of his video section "On the 4th floor", Fugnoli recalls that in the last quarter of 2018 "the central banks continued to consider the situation of the economic cycle not dangerous and to think of a progressive normalization of monetary policies", while the markets had foreseen the coming slowdown phase and therefore judged it inadequate the decision of central institutions to continue along the path of rate hikes. This divergence caused the very substantial decline recorded by the Stock Exchanges in the period October-December last year.
Now, however, “the central banks recognize a certain weakening of growth – continues Fugnoli – and the markets admit that there is no danger of a global recession. There are some problems in Europe, but the United States – which is the linchpin of the global economy – are still in good health”.
What will this reconciliation produce in the world of finance? The Kairos strategist predicts that the new balance “will give a big boost to the markets in the next quarter and beyond".
On a geopolitical level, Fugnoli believes that Brexit no longer constitutes a great unknown factor, because we will go towards a solution and, too. The more uncertain scenarios are instead the trade war between the United States and China, which however "should find a solution, positive or negative, in the coming weeks", and the dispute between the US and Europe, "particularly on German cars, which however will not have global consequences".
As for the macroeconomic indicators, “inflation should remain moderate, while growth should remain positive, even if not at last year's levels – continues Fugnoli – I company marginshowever, they face some negative pressures to increase costs, but still remain at very high levels”.
That being the case, In which direction should investments be directed? “So far the most rewarded markets in 2019 have been the US ones, but if, as is probable, the dispute between the US and China is resolved in a positive way, we will also see a more positive trend in Asian stock exchanges and currencies”. So, according to Fugnoli, “even if there is still a margin of uncertainty, investing in Asian countries should allow for an appreciation on the capital account and also on the exchange rate”. This "Asian phase will last a few months" and in the meantime the actual negotiations will begin "on the dispute between the US and Europe”, with the latter that “will remain under pressure. In part, the markets are already discounting this prospect, but there will be difficulties. Europe's moment will therefore come later in the year, when, hopefully, the dispute between the USA and the EU will also have ended”.
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