October Market and Economic Update

• Our long-term view is largely unchanged and we continue to believe our more cautious outlook is rational. Global growth remains fragile despite underlying strength in the US, while China remains a major concern to the global economy in the medium term
• While the Fed’s decision to maintain the rate of taper has helped create short-term stability, we believe it to be behind the curve and complacent over the prospects of rate tightening
• Excess liquidity has decreased yields year to date, and continues to drive investor behaviour further along the risk spectrum
• The distorting impact of excessive monetary stimulus is apparent across all asset classes
• The equity re-rating looks to be complete, reflecting greater political and economic confidence. Developed world equities are expensive against their own history and are approaching fair value relative to bonds

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