Red lights spell danger

Quantitative easing has done financial markets the power of good. But a host of long-range valuation measures are beginning to suggest that the last seven years of feast has run its course. With central banks remaining cautious on policy normalisation this may not automatically evolve into seven years of famine. But the probability of a period of rather lacklustre returns is high. And the risk of a more substantial correction is growing. We are cutting global equity exposure to go underweight. We expect Europe and Japan will remain outperformers, on their central banks continue to print, but currency exposure has to be hedged.

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