The global economic outlook has become slightly more uncertain, but remains positive. Earnings growth is also picking up – especially in the US, Europe expected in 2015 – and monetary policy continues to be accommodative, partly due to low inflation.

## Correction in fixed income markets relatively subdued


## Markets are over-reacting 
So far October has been a poor month for risky assets. Large numbers of equities, commodities and riskier bonds were sold, while 10-year bond yields dropped sharply.

The rise in risk aversion was triggered by a string of negative news reports. In Europe, the ECB disappointed many market analysts by issuing too few details over fresh stimulatory measures. At the same time, a number of worse than expected data was published, including in Germany. The mood at the IMF’s annual meeting was gloomy and the impression arose that markets had been too far ahead of economic trends over the past two years.

Markets are capable of creating their own reality; if the pessimism persists and becomes widespread and financial conditions consequently deteriorate, this could have a negative effect on the real economy.

However, we do not think that risky assets have become too expensive. Indicators are pointing to the momentum in world economic growth remaining intact. Momentum has been picking up in global consumption over the past few months and it will receive an additional tailwind from the sharp drop in the prices of oil and other commodities. The fall in interest rates is positive for the housing market as it means lower mortgage rates. Businesses are also in good shape and willing to invest.

We believe that the markets are over-reacting and see few fundamental arguments for the sharp correction. Several technical indicators are pointing to a recovery in the short term. We retain our overweight positions in equities and real estate..