Going into 2017, the market consensus was one of a strong US dollar environment, with the expectation of the US engine firing on all cylinders, with support from fiscal policy, monetary policy and de-regulation. The engine has stuttered, the US dollar has been declining all year and not many US dollar bulls are left. We are taking stock.
Since Trump's election in November, financial markets have focused on the reflation trade. Inflation expectations and bond yields have risen, as have equities and commodities. Although the US dollar has strengthened by a little over 3% on a trade-weighted basis, this masks the individual currency winners and losers.
As our attentions turn to outlooks for the year ahead, it's best to avoid messages from perma-bears, perma-bulls and the hopelessly vague. However, clairvoyance is not a strategy. Instead we should try to favour sound analysis and be more willing to think (and talk) in probabilistic terms, or as I like to call it, shades of grey.
Six years into a bull market and with many equity indices at all-time highs it is understandable that investors are nervous about when the party will end. Unfortunately (or fortunately) predicting the end of a bull market is not as easy as looking at a calendar.