Staring down doom and gloom, global markets reap the best start to a year since 2009

30/06/2019 10:06:00 PM

#ANALYSIS: Staring down doom and gloom, global markets reap the best start to a year since 2009

ANALYSIS: Staring down doom and gloom, global markets reap the best start to a year since 2009

Global markets across most assets have made their strongest start to the year in a decade, which is odd given economic fundamentals are shaky at best.

If global markets were priced off headlines, they'd be deeply in the red as the first half of 2019 came to an end.Very large text size Jakarta : It has been nearly a year since Indonesia's President, Joko Widodo, formally put his name forward as a candidate for a second term in office.Share on Facebook Share on Twitter Thousands of people have turned out for gay pride celebrations across the world, including a boisterous march through the Mexican capital.The 29-year-old from Perth lives in the hermit kingdom and last communicated with relatives on Tuesday before going silent on social media.

Key points: Global markets have rebounded strongly across most assets after a troubled end to 2018 The ASX has been one of the stronger performers, up 17pc in the first half lifted by both miners and banks Momentum is unlikely to be maintained after the rapid first half acceleration and worries about the global economy The trade war between the world's two biggest economies seemed to ratchet up on a monthly basis; a hundred billion in tariffs here, a hundred billion there and pretty soon you're talking serious disruption.Economic data was generally disappointing, big economies were slowing and all sorts of recession precursors were flashing amber.the court confirmed the president had won a second and final term in office.Inverted bond yields were threatening to make an appearance on popularist current affairs TV programs — OK, that may be taking it too far, but you get the gist.AP Other LGBTQ celebrations took place from India to Europe, with more events planned for Sunday in New York and elsewhere around the globe.Staring down the maelstrom of negativity, global markets have produced one of the most lucrative first half rebounds on record.Credit: AP But as the dust settles on the long campaign, the question arises: what challenges will confront Joko in the next few years? Infrastructure investment was the President's signature achievement during his first term, with thousands of new kilometres of roads, rail, new air and sea ports built, and billions spent on small-scale projects.It is not just one asset class, it has been across all sectors — something few investors would have predicted as many assets, including US equities, were tumbling into the clutches of bear markets on Christmas Eve.Australia does not appear to have asked its ally to raise the issue.

Stocks, bonds, commodities, Greek banks — you name it they've been scooped up by investors.Getting on with it: Indonesian President Joko Widodo, left, is welcomed by Japanese Prime Minister Shinzo Abe in Osaka, a few hours after the court's decision confirming his election win.AP Same-sex civil unions have been legal in Mexico City since 2007, and gay marriage since 2009.A lot of that has to do with the dire situation markets founds themselves in at the end of 2018.Global equities have gained $US8 trillion since the start of the year, but that's still a trillion or so shy of where they were 12 months ago.These include (but are not limited to) growing tension between China and the United States over trade, technology and access to the South China Sea, which China has claimed almost entirely despite competing claims from neighbouring countries.Global equities market capitalisation Things are not getting better, why are markets? The odd thing is the fundamentals haven't improved; data is still disappointing, manufacturing heartlands are suffering from a mild infarction, global trade is slowing and central banks are cutting rates in the expectation things will get worse before they get better.People from New York and afar came to take photos and share in the legacy of the gay bar where patrons resisted a police raid, sparking protests and longer-term organising that made the cause considerably more visible."The last time gains were so broad was in 2009-2010, when the global economy was recovering post-Lehman, the Fed implementing QE [quantitate easing] and valuations relatively cheap," J.Trade in the region will also be a delicate issue.

P.Morgan's head of cross asset strategy John Normand said.Loading The two leaders have had their disagreements, such as over the proposal to move Australia's Israeli embassy to Jerusalem, but they now have three years ahead to work on their relationship.There is a difference this time around, according to Mr Normand."Now, the Fed is undoubtedly on an easing path but the global economy is slipping slowly into sub-trend growth due to an unresolved trade war and cross-asset valuations are fair-to-expensive.Joko has said, as have other regional leaders such as Thai Prime Minister Prayut Chan-o-cha and Australian Trade Minister Simon Birmingham, that he wants to see the Regional Comprehensive Economic Partnership signed by the end of this year." So what are the potential spoilers to ongoing gains? "Another US-China truce that leads eventually to stalemate, higher tariffs and reciprocal tech bans, a poor corporate earnings season despite an interim trade truce, a Fed that eases much less than expected, and a US debt ceiling/budget cap debate that turns dramatic," Mr Normand said.

They are all entirely plausible outcomes.Tom Lembong, the chairman of Indonesia's Investment Coordinating Board and ally of Joko, said recently the President would "resume or even accelerate economic policy reforms" and open the country's economy to the world, while spending more on training and reforming the tax system so it was more friendly to foreign investment..

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Stephen_Letts This makes the housing bubble look tame and sound on fundamentals.

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