The threats to global equities: Contagion from China, slower growth, depreciating currency and increasing debt

After a long period of upward trending equity markets, the last ten months have been a harsh reminder for active equity managers of what uncertainty can do to stock prices. We have witnessed large swings in terms of general sentiment as well as factors quickly going in or out of favour.

Navigating these markets requires nerves of steel. Volatility as measured by the VIX has spiked higher and more often over the last year, with the latest rise having been induced by Brexit last month.  Although the VIX often quickly retreats to normal levels after spikes, risks have increased - be they related to politics, monetary policies or corporate earnings.  In the US, investors are worried about valuations being around fair value and the strong dollar impacting earnings. In Europe, risks are more political in nature with upcoming elections in various countries amid rising popul...