After the sharp market correction in October, the Fed, trade war and Italy/European Union (EU) standoff will keep volatility high. But many bad news have been priced in already.
However, growth remains solid and the economy is not heading to a recession.
Clearer evidence of inflation and labor market tightening will have the Fed continue in its rate hiking. The European Central Bank (ECB) has not signalled any change in policy: Quantitative Easing (QE) will end in December as expected.
We remain positioned for a further moderate rise in yields (more so, in Southern Europe), still prefer cash and favor a small overexposure in value equities.