Q2 global equity risks: Politics, policy and debt overhang

Market volatility continues

A volatile start to the year continues to impact the global equities market, writes Kevin Troup, global equities director at Standard Life Investments.

After the US Federal Reserve raised rates in December 2015, they were perceived as no longer being the last resort buyer of risk assets. This raised the risk premium in the equities markets, affecting the discount rate used by analysts for stocks with earnings growth prospects over the long term. In January, meanwhile, the Bank of Japan surprised markets and investors by moving to a negative interest rate policy and added to the growing list of countries adopting this policy. Banks were hit hard as investors worried about their ability to generate earnings in such an environment. We h...