Monthly Video: Faded Optimism and Complacency on Markets Would Clear the Horizon for 2018

Global growth is accelerating at the moment and will continue to be solid. Growth is global and synchronised, meaning that all regions of the world are benefiting from this acceleration in growth.

The US economy is a big part of that growth and the anticipation of the fiscal stimulus package explains part of this acceleration. The impact will be very positive next year, but in 2019, we expect the US economy to slow significantly. GDP growth should go from 2.7% in 2018 to 1.9% in 2019.

This US economic slowdown will have implications for bond markets. We believe that the Treasury yield will go towards 2.75% versus the 3% we expected before. The US slowdown will probably slow global growth but the implication is not as negative for the European economy.

So we stick to the view that the tapering by the ECB will occur somewhere around the end of 2018, but we will see no rate hikes before the end of 2019. So no change to monetary policy in Europe and no changes to our target for the Bund, still at 1% in one year from now.