RAMBLINGS

Edito After several “good” news stories (the revised Italian budget, China-US relations warming up, T. May surviving), the markets moved ahead again this week, with emerging market assets and credit in the lead. Risks in 2019 were, however, emphasized in recent days with a negative macro news flow in the Eurozone (confirmed by the ECB), in China and a Brexit outcome that is ever more uncertain. The FOMC is the last major event of the year. More than the expected 25bp hike, it’s the dots that will be the deciding factor: while the market has certainly gone too far in its de-pricing (more than 2 hikes anticipated for 2019 in mid-November versus barely 1 now), a reduction in 2019 dots would certainly consolidate the 10 year USD below 3% for some time. The status quo would, on the other hand, push the market to realign with the risk of a compulsory correction, which, of course, will not at all be to the liking of risky assets. Can’t wait for Christmas!