In periods of extreme volatility within asset markets, it is hugely important to take a step back from the noise and return to the fundamental backdrop. Our view remains one where activity paints a supportive macro picture, particularly out of developed markets. Data in the US, UK and Europe remains encouraging; yes, it is backward looking in some instances, but the message is one of resilience as we approach the last quarter of 2015, even in the face of weaker emerging economy headwinds.
US data exhibits an economy which is broadening out in terms of expansion and one that no longer requires an emergency policy stance from the Federal Reserve. At the headline level, last week’s revision higher of second quarter GDP to 3.7% was corroborative of our view. US consumption remains healthy, while the positive implications of the oil dividend should continue to play out. We remain of the view that the Fed should start to gradually raise rates and the economy and markets can digest this. The missing link remains inflation, but in the Jackson Hole summit over the weekend the Fed reinforced its conviction that the current disinflationary impulse is energy led and transitory.