Market moves jar with near-term economic prospects

The big market moves over the past week – with stock markets and bond yields both falling sharply – present something of a dilemma for our own views. We have long expected an economic slowdown in 2019, as the policy mix becomes much more restrictive. Accordingly, to the extent that markets and the consensus are simply catching up to our long-held view that economic growth will slow, we feel vindicated. Nevertheless, on balance we’re still a little surprised to see such a growing panic in markets develop quite so soon given the relatively benign economic backdrop.