The risks have not disappeared

As rapidly as prices headed downwards on stock markets at the end of last year, so quickly they bounced back again in 2019. US stock markets are even close to marking an all-time high again, and shares prices in Europe and Germany have also risen sharply in recent weeks.

The price rally was clearly driven for the most part by the more positive economic data, particularly from China. Here, the fiscal measures aimed at boosting the sluggish economy could well be bearing fruit. In addition, there are signs of an agreement being reached in the US-Chinese trade talks, diminishing the likelihood of a further escalation in this trade dispute. Moreover, monetary policy in the USA is shifting to a more neutral and in Europe to a more expansionary course.

All this has also prompted investors to reposition themselves in emerging market currencies. Currencies such as the Mexican peso, the South African rand and the Russian rouble are particularly striking cases in this regard, having posted significant exchange rate gains. At the same time, safe havens such as the Swiss franc have come under selling pressure in recent weeks.

However, there are reasons to suggest that investors‘ increased appetite for risk will not continue. The global economy remains exposed to risks, and the outlook for the global economy also remains bleak. The current improvement in sentiment should therefore be susceptible to setbacks.

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