According to analysts at Nordea Markets, higher US interest rates spurred by new signals from the Federal Reserve have triggered a sell-off in equity markets over the past two weeks.
Key Quotes
“Most of our global macro and market predictions for 2018 have proven correct, even though it has been a rocky road until the recent market sell-off. We once again reiterate our negative stance on risky assets, which we first formulated in mid-May.”
“The forward-looking business cycle has passed its peak and leading indicators suggest to us that the lost momentum should continue well into 2019. A weaker trend in real economic indicators is therefore imminent, some of which have already started to contract.”
“The rise in underlying inflation pressure, stemming from tight labour markets, is showing no signs of easing. We believe quite the contrary – and therefore that monetary policy risks being behind the curve.”
“Rising real rates are another factor we need to add to our cocktail of a failing business cycle with too-lofty profit expectations. Even after the recent sell-off, we believe that the stock market still expects much too rosy a future – disappointments lie ahead.”
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