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Global shares plunged in the fourth quarter. A toxic mix of slowing economic growth, an ongoing trade war between the US and China, as well as political instability in Europe poisoned risk appetite across the equity space. However, it seems to have been the Fed’s dogged determination to normalize monetary policy that set the stage for markets to truly care about these headwinds.

Tightening Global Global Credit Conditions

The landscape does not appear much rosier heading into the first quarter of 2019. The conclusion of the ECB’s asset purchase program will amount to a de-facto acceleration in quantitative tightening (QT). This means that absent an overt increase in monetary stimulus, the global cost of credit will continue to be pressured higher even if the Fed withholds further outright hikes (as markets suspect they might).

See the complete Q1'19 Equities forecast as well as forecasts for major currencies, Gold, and Oil.

--- Written by Ilya Spivak, Senior Strategist