I'm back. It appears that markets in the UK rallied to all time high after Brexit, and S&P500 rallied too to a record high after Trump's victory. Both incidents are counter intuitive! However, I can explain that economics are often uncorrelated to stock returns. Stock markets are forecasters of future economic returns 6 to 12 months into future.
Both events are likely to cause inflation. It's a roll back of globalisation and in the short run, wages will rise. Long run, trade wars erupt which means domestic economy suffers.
My asset allocation is around 70% equities, 30% bonds. Stock markets are at overbought territory and a pull back is to be expected. But I'm not expecting any bear market soon.
Inflation however is rising. We could see rate hikes in the US and UK this year. Finally, all inflation ends in a crash as yield curves invert worldwide. I expect this to happen late 2017 early 2018.
Yet I do not know if the yield curve continues to be a predictor of future growth. QE has changed all this. I will be very vigilant now.
Both events are likely to cause inflation. It's a roll back of globalisation and in the short run, wages will rise. Long run, trade wars erupt which means domestic economy suffers.
My asset allocation is around 70% equities, 30% bonds. Stock markets are at overbought territory and a pull back is to be expected. But I'm not expecting any bear market soon.
Inflation however is rising. We could see rate hikes in the US and UK this year. Finally, all inflation ends in a crash as yield curves invert worldwide. I expect this to happen late 2017 early 2018.
Yet I do not know if the yield curve continues to be a predictor of future growth. QE has changed all this. I will be very vigilant now.
