The economic backdrop remains conducive to corporate earnings growth and monetary policy normalisation. However, three risk factors tarnish the positive outlook: Italy, trade wars, and emerging markets. Indeed, questions over Italy’s government finances are unlikely to be fully answered by the 2019 budget; President Trump has announced a fresh round of tariff increases; and the fragility of some emerging markets is giving rise to murmurings of contagion risk. As such, and despite healthy fundamentals, we are adopting a relatively neutral stance on financial markets in the short term.
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