2019 has been good - but can it last?

ASSET markets rebounded strongly in the first half of 2019, following a poor 2018. Global equities led the way, rising more than 10 per cent, but bonds (particularly riskier bonds) also performed well. Oil has rallied and gold recently broke out into a six-year high.

The strong first-half performance has made some investors cautious on the outlook for global equities, given slowing economic growth and inflation, continued United States-China trade tensions and a sustained decline in bond yields.

The key question we face today is whether the equity market rally will extend through the second half of the year and into 2020. The answer depends most likely on whether the current growth slowdown will lead to a recession over the coming year. We believe there is a relatively low probability of a US recession over the next six to 12 months, thanks to the decisively dovish turn in monetary policy by global central banks and China's fiscal and monetary stimulus.