SINGAPORE (May 28): Financial markets have become highly volatile of late, with oil prices, bond yields and currencies swinging wildly and equities enduring many a turbulent turn. Investors have had much to worry about. Global economic growth has been looking shakier, especially in Europe and Japan. Oil prices are at a four-year high. Trade disputes among the major economies could damage world trade. Where geopolitics is concerned, not only are the risks proliferating but the unpredictability in so many of these hotspots also makes it difficult for investors to formulate a clear view on risks and rewards.

We suspect that the next few months will not be benign for markets. First, we expect global growth to regain momentum — good for Asian exports, economic growth and corporate earnings, but the financial consequences could be troubling. Second, while compromises among the big countries should prevent an immediate descent into trade wars, protectionism is going to worsen. Finally, we see a rising likelihood of political upsets, which investors may be underpricing.

Upside for growth sounds good…

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