The FTSE All Share has drifted this year but decent money has been made from international stocks. The MSCI World has been driven higher principally by the performance of US stocks which in turn have been driven by the ecommerce stocks. The US economy is responding to Trump's spending package and earnings are benefiting. EPS growth is exceeding 20% yoy, a little less than half of which came from Trump's tax cut. Encouragingly, corporate revenues are up 9.5% over the period, well ahead of nominal growth rates. Speculative hunger appears to be significant: those who only lost half their shirts on cryptocurrencies, now have the chance to lose the rest in cannabis stocks. Piling into Facebook and Amazon is far more rational in comparison and who are we to stand in the way of such momentum. Expectations of 10% EPS growth next year sounds demanding but could be possible as a virtuous circle of confidence, spending, investment takes hold.

We were right to fear tightness in the oil market as we did at the beginning of the year. The oil industry needs continual investment to maintain supply and the freeze on development has had an inevitable consequence once the stock overhang had been dealt with. We highlighted last quarter about some of the secular changes that could worsen the inflationary outlook. Now CPIs are ticking up globally as energy prices work their way through. The effects of the trade tariffs are yet to be reflected.

Years of supine inflationary pressures may have established a degree of investor complacency. There are still good reasons to hope that prices will remain under wraps but we are conscious that the risks are rising. Debt levels are high and a shock rate rise could have grim consequences. The Fed has started to dab gently on the brakes and few passengers have noticed, they will be jolted awake if the Fed is forced to slam on the brakes.

Emerging markets have already felt the effect of the Fed's action. Many corporations have issued significant amounts of dollar bonds and the BIS warns that the region may have significant further exposure via the swaps market. GEMs have been lagging all year, partly caused by the dollar strength, partly through more country specific issues. Events in Turkey and Argentina may not be connected but impacts investors invested in both. As we experienced in 2008, contagion comes about through the commonality in investor positioning as much as economic reasons. GEMs should benefit from the growth in the global economy and remain priced well below developed markets. This is not the moment to be jettisoning our overweights.

Instead we should be considering where might be next. The IMF has recently highlighted the vulnerable position that the UK finds itself. Debt levels are high, savings rates minimal and productivity growth poor. Consumer debt remains very high and sentiment is highly tied to the housing market, which is showing signs of weakness. UK exporters have not responded to the 2016 devaluation, other than to lift their margins. This is disappointing and it may have been caused by the Brexit uncertainty. It feels scarily reminiscent of the Italian economy back in the days of the lira. The collapse of the Salzburg summit suggests that the only political way to deal with the Brexit problem is like how a cleaver deals with meat. Markets would hate this but there is still hope of a compromise. While our instincts tells us that the Brexit uncertainty may create opportunity in UK stocks, there are still plenty of other issues facing the UK economy that can't be overlooked.

It is no surprise to see Trump's policies bringing in the bacon in the short term, however, they are likely to come with a foul aftertaste. Fiscal policy will tighten sharply in 2020 but the Fed may be forced to act before then. Any rates shock would cause financial markets problems and extended borrowers distress. Unfortunately, there are no assets which will do well if central bankers are forced into hiking rates. If we don't get a rates surprise, risk assets will outperform. In such circumstances, a cash overweight seems sensible to mitigate risks and there appears little benefit in any FI duration. There have been no changes to our grid.