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We think markets are wedged between rising trade uncertainty and a deteriorating US economic backdrop with elevated valuations and heavy positioning exacerbating price volatility. This is not a good place to be when equities have a razor thin cushion for disappointment or when they are priced for “best-case-outcomes” such as trade related uncertainty. However, we doubt the drivers behind the current sell-off and rotation signals the end of the bull market. Broader equity performance alongside outperformance of catch-up trades strengthens the resilience of the equity outlook. However, before a new trend can be established, clarity around trade & growth risks is needed. Until then the churning will continue.
