Markets are benefiting from a supportive macro backdrop – Deutsche Bank

In view of analysts at Deutsche Bank, global markets are benefiting from a supportive macro backdrop and suggest that this context is set to continue, but there are risks.

Key Quotes

“Risk assets continue to perform strongly

• US equities record highs, strong rally in Europe
• Credit spreads at or close to multi-year tights”

“The macro backdrop is supportive

• Strong cyclical growth, easing fiscal policy, end of regulatory drive
• Tightening monetary policy, but only gradually and from ultra-accommodative levels
• financial conditions still strongly supportive”

“Positive context set to continue, allowing for continued strong performance for risk assets

• On current expectations, monetary policy tightening to be benign, not disruptive for risk”

“Markets not shielded from a correction, e.g.,

• Sharp and disorderly repricing up of rates, ala 2013’s taper tantrum
• triggered by faster than expected rise in inflation
• Sharper growth slowdown in China, if sticky inflation prevents easing of monetary policy”