In this second instalment, Stephen Jones, CIO of Kames Capital, pens an updated letter to investors concerned about macroeconomic and geopolitical headwinds.
Good to hear from you again. I hope all is well and that your finances are withstanding these roller-coaster equity markets. Stealing a football line, it has been a winter of two halves.
You are quite correct to suggest that, if the US Federal Reserve is worried, then shouldn't the rest of us also be concerned?
There is no doubt that the change to the future path of US money market rates since last November, which has seen end-2019 rates fall from 3.3% to 2.5%, has been dramatic.
For this to have happened when wages in the US are growing, in real terms, at almost their fastest pace in five years certainly makes you wonder what the Fed fears, especially as it seems to be indicating that 2019 will not see any increase in US policy rates (which are still well below historic norms).
As the imminent jump in the weighting of Chinese equities and bonds in popular market indices confirms, China now leaves a very strong footprint in the global economy and financial markets.
Earlier moves to let some steam out of overheating Chinese credit markets inevitably went too far and earlier this year, the Bank of England's Mark Carney gave voice to concerns within the central bank community around the growth outlook for the Chinese economy.
Chinese macroeconomic policy responded to the situation by turning on a six-pence this winter, and I am prepared to give these reflationary efforts the benefit of the doubt.
Within the US, weakness in activity in the first quarter shouldn't surprise anyone. For more than a decade, first-quarter economic growth has averaged around half the pace of the remaining quarters.
If we add from this year the longest US government shutdown yet seen, smaller aggregate tax refunds than had been assumed and the impact of Trump's import tariffs, it is no wonder the economy looks soft - at the start of March it looked in fact to have stalled.
We might reasonably have expected the Fed would understand these seasonal and unusual trade-induced headwinds to growth.
Perhaps the reality is that it knows no more that the rest of us in terms of judging just how fragile the US economy might be - especially given the weakness in the housing market seen throughout most of last year.
It is also true that activity levels - away from China and the US − are hardly inspiring. The Japanese economy is managing growth of just 1% (on a good day) and the eurozone has shown weakness that went beyond the issues caused by changed vehicle emissions controls rippling through the important auto manufacturing sector.
Without doubt, it remains much easier to slow an economy (by hiking rates) than it is to stimulate one (given that last time stimulus was needed it took zero rates and a massive QE effort before growth resumed).