Market Viewpoints
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"It is never too late to be what you might have been"
Last week, the European Central Bank (ECB) sent a strong and resolute message to fight dis-inflation by cutting its main lending rate, the deposit rate as well as pre-announcing the purchase of asset-backed securities. This could imply a potential expansion of €1 trillion in the ECB balance sheet, which could provide a boost to the outlook in the Eurozone for the next few months. ECB President Mario Draghi has once again bought time, and both European equities and bonds have responded positively. For much of the year, markets have been ignoring the referendum vote in Scotland, but not anymore! On Sunday, the complacency was broken, when the UK woke up to the shock news that the Yes campaign was now marginally ahead in the polls for the first time. A Yes vote in Scotland may have repercussions not just for the UK, but further afield as well. It could provide a catalyst to other discontented regions in continental Europe. The August selloff in the equity markets was short-lived and the month ended with a new record high. Recent data in the US has surprised mostly to the upside. An improving geo-political picture in the Ukraine, accelerating US growth and the unveiling of a stimulus program in Europe, all keep me positive regarding equities. I would not rule out a short period of market weakness around the US Federal Reserve meeting later this month. However, any sell-off would be a buying opportunity. The drivers for positive movement in the equity markets are central banks and seasonality, which in my view, would see the risk asset rally to the end of the year.