Investment Outlook


The US and China have not come closer to resolving their trade conflict during the last quarter. The trade tensions, combined with disappointing macro-economic figures from Germany in particular, caused volatility on worldwide equity markets and lower interest rates. In the US, 10-year treasuries fell from 2.0% to a low of 1.45%. In Germany, the 10-year bund rate fell as low as minus 0.7%. Despite this, markets continue to trade around their recent highs. The difference in valuations between growth and value stocks has reached its highest point since 2000, during the run up to the dotcom bubble.


The market rally that started in January this year came to an abrupt end on May 6, after the US president announced that the import duties on USD 300 billion worth of Chinese goods would be raised to 25%. This announcement was in stark contrast with positive signals emerging earlier regarding US-China trade talks.


US trade policies may permanently affect the Chinese production industry. Meanwhile, markets shrug off disappointing macroeconomic indicators as central banks loosen policies. And contrary to economic theory, making a profit doesn't seem to be a pre-requisite for corporate success these days.