The Trump administration’s decision to up the ante in trade negotiations with China has caused volatility to spike and has spooked financial markets. We take a look at the underlying data to see what the short term outlook is for global equities.

ClearMacro’s short term risk matrix stays moderately risk off and we continue to be cautious about the global risk outlook.

We are moderately risk off global equities

As regular readers will know, we have also written a theme piece about the rising risks of recession given how long the current cycle has been. Does the escalation of the trade dispute bring the risk of recession closer? Amid the noise and the worry, the below signals suggest we need to see a more significant global deterioration before we can call an end to the current cycle.

Our cycle sustainability signal while deteriorating is still in neutral territory….we have bounced from these levels before.

The developed market monetary policy expectations signal, again while deteriorating, stays bullish.

China fiscal momentum is still supporting global economic cycle prospects.

Indeed, our China short term economic activity matrix is positive.

But our US short term economic activity matrix is bearish (although less bearish than a few months ago).

In summary, with the short term risk matrix moderately risk off, we are increasingly cautious and suggest investors maintain a neutral to small underweight to global equities.