Focus on fundamentals to ride turbulent markets

From economic deceleration to where? It is time to look at where the economy is heading after the synchronised slowdown that the market has now priced in. A global economic recession is not the central scenario. The US economy is still enjoying solid growth and barring a major policy mistake (from the Fed or Trump), it should continue to grow nicely, although at a decelerating rate. Europe’s slowdown is more pronounced, as it is bearing the brunt of multiple political issues (Brexit, Italy and more recently France). However, with some of the risks cooling or passing (easing of trade tensions, weaker oil prices, European elections in May), we see a possible stabilisation of economic conditions through the year, with growth expected to slow down but remain above potential in 2019/20. In EMs the picture is more varied, with some countries expected to decelerate (China) and the emergence of some positive stories (e.g., Indonesia). Overall, we still see a benign economic scenario, with trade disputes and geopolitical factors being the main risks to monitor.