The global economy has survived the scare of the Brexit vote and the resultant sharp correction in asset markets, but the global macro outlook is no rosier since the last quarter even though the recession scare was overdone.

This quarter we have seen intense political and economic volatility from the UK’s unexpected Brexit vote and this will continue with the US Presidential Elections, Italian constitutional reform referendum and upcoming Spanish, French and German elections.

In this update we examine some current key risks such as the impact of slower trade growth on global economy, Central Bank policy and government bond market volatility.
Considering current global uncertainties and the macro outlook, London & Capital remain relatively risk averse in our asset allocation, focusing on our well-established income theme within both fixed income and equity strategies.

Our asset market outlook remains unchanged. US equity markets continue to be seen as a safe haven despite fuller equity market valuations. UK Brexit has been a major event for European equity markets and the longer term implications are far from certain. With this in mind, London & Capital’s European equities strategy remains unchanged and will continue to focus on international franchises with a diverse earning stream. With fixed income, the broad outlook is constructive; Central Bank policy remains highly accommodative, with a strong probability that the Bank of England, Bank of Japan and European Central Bank will ease further. Absolute yield levels in government and investment grade bonds have fallen progressively to ever lower levels.