A huge rally driven by the US Federal Reserve’s recent about-face on interest rates has left some big-name fund managers nervous that markets now look highly vulnerable to disappointing economic news.
Stocks and bonds have ripped higher over the past two months, and received a major boost when the Fed dropped its biggest hint yet that it could start unravelling its series of rate rises as soon as next spring. The ascent leaves US equities close to their highest levels on record.
In the short term, that fosters a celebratory mood. But it also means key assets are now priced for perfection — a benign world where central banks chop interest rates back down but without an economic recession forcing their hand. Big investors worry that these assumptions may not match up, and that it would take very little to force a rethink in a year studded with economic, political and geopolitical risks.