Via Saxo:
Summary: Equities continue to rally although the first week of December has been more choppy due to mixed trade headlines from the US and China. Overall, US equity valuations have hit dangerous levels for long-term investors and the recent Swedish Services PMI figures are highlighting emerging spillover effects from manufacturing into the services sector which is a dangerous dynamic as it goes against the current economic rebound narrative holding up equities.
As regular readers of our views on equities know we have been defensive on equities for more than a year. The last two months we raised the concerns that equities are detaching from the realities of macro risks while acknowledging the momentum in equities. The broader narrative supporting equities is central bank easing, hopes of more fiscal impulse and lastly the “phase one” trade deal between the US and China.