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.

The CDU, CSU and Mrs. Merkel are the losers in recent “horse-trading” in Berlin. The winners are the SPD and those wanting further rounds of European integration. We analyze the emerging Grand Coalition (now discussed in German-speaking circles under the acronym GROKO) and its likely consequences. European “integrationists“ have reasons to rejoice. Those who believe in the free operation of markets and worry about public sector financial excess should be very nervous. Germany’s period of economic outperformance is drawing to a close.

The U.S. is moving toward becoming a tax haven, putting pressure on the EU and other countries. 2018 is likely to be the year of "maximum monetary stimulus." The economic recovery is the third longest in U.S. history. An increase in volatility is imminent. We still have a neutral weighting on equities, favoring European equities at the expense of very expensive US equities.