The judgment of the financial markets is obvious. The US economy will win the trade war. The US stock market rises in August 3% while Europe falls 3.5% and China 5%. The mining companies face a decline by 10%, signalling a future slowdown in commodity demand and thus a slowdown in economic growth. All of this at a time when the FED is pushing forward to the normalization of its monetary policy. The FED acts based on the current strong macro data in the US. It is unlikely that they will abandon it. The difficulties of Turkey, South Africa, Argentina and other countries are largely home-made and have only been intensified by the rising USD and their excessive foreign debt.
The probability of US interest rates hikes by 0.25% each in September and December is high. Currently, at least one interest rate increase has been priced into the USD, and the second will be constantly re-evaluated in these days and weeks with the incoming macro data. A rising USD is likely to pressure the emerging markets again. We also estimate that the trade war between the US and China will continue to escalate. Therefore, we expect Asia, Europe and Switzerland to remain under pressure. The US stock market could suffer due to rising US yields.
To sum up, we remain cautious because currently we value the risks higher than the chances.