A review of 2018 and a look into the near future. The global economy is cooling down noticeably, defensive strategies are preferable at the beginning of the year.

The US mid-term elections have gone broadly as expected. The results mean another round of tax cuts are now unlikely. Rather we will probably see a return to “Gridlock in Washington“. The dollar’s period of strength may be coming to an end.

Independent asset managers in the Swiss are realigning their portfolios to protect against political risk and the threat of an intensified trade war.

Virtually all equity markets have suffered sharp price falls in recent weeks. The defensive positioning of our investment strategy, in particular the equity underweight, has paid off. A year-end rally in the equity markets is likely, as many markets are technically oversold. We are preparing for a short-term tactical increase in the equity allocation.

Hoping to avoid a loss of face, the UK and the EU can be expected to continue to negotiate right up to the last minute. Both sides want to avoid a “hard Brexit“ – i.e. a Brexit without agreement on the future UK-EU relationship – and this mutual interest means such an outcome can be avoided. Sterling is clearly undervalued and attractive on a medium-term basis. By contrast, UK stocks have an attractiveness rating which is only average.

Sell-off on the stock markets. We recommend not panicking. On the other hand, we believe it is still too early for targeted increases in the equity quota. We are still maintaining our equity underweight in order to consider an increase if necessary

For 2018, we expect global economic growth of 3.5%. In 2019, we expect growth to cool slightly. The exporting nations are suffering from the protectionist measures of the US government.

On September 9, the Swedish Rigstag elections will be held. The European Commission has criticized the elections. This could not take place anonymously, because the electoral lists of the parties would be publicly displayed. Therefore one sees if the voter takes the ballot paper of the party to be voted for into the booth.

In October, election chaos in Europe could weaken the euro. After that, chaos in the USA could weaken the dollar. On October 14, the Bavarian state elections will take place. The CSU and the SPD are threatened with landslide losses, which could jeopardize the continuation of the Grand Coalition.

Turkey: should we be alarmed? The collapse of the Turkish lira has taken on dramatic proportions.

Investors feel themselves confronted with many geopolitical risks. The most disturbing would be an escalation of trade hostilities and protectionism. We still believe a serious trade war can be avoided. 2018 is likely to go down in the history books as the “peak liquidity“ year. It’s too early to re-enter the markets.

Executive Summary We expect the global economy to grow by 3.5% in 2018. In the USA in particular, the growth figures for the second quarter are likely to surprise on the upside. The economic upswing in the eurozone is losing some steam. Exporting nations are suffering from the US government's "trade skirmishes". In the short term, however, the risk of recession remains low. The procyclical US fiscal policy is ruining the US national budget in the medium term. We expect in [...]