The narrative that connects the 2018 edition of our Themes is the impact of DM monetary policy normalization, which is generally gaining momentum (with some exceptions), on countries’ balance sheets.
The withdrawal of easy money will increasingly undermine the resilience of most economies to shocks, acting as a drag on growth and, on occasion, as a catalyst for market corrections. Although we expect the environment of steady growth to continue, normalization implies an opportunity for policy mistakes.
In combination with stretched valuations, certain countries will be particularly vulnerable to political and policy shocks. And, as growth remains stable, trade friction and competing trading groups, along with weaker productivity, will limit future improvements.
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