Market overreacts to slowdown

There is absolutely no doubt in the consensus view that the world is expecting slower growth next year, indeed market evidence from the fixed-income markets seems to be sending us a clear signal that inflation is not a threat. All in all, the case for a perfectly engineered soft landing of the world economy now seems to be in place. Despite this benign environment which suggests that the worst is over for interest rates, equity markets have over-reacted to this incoming slowdown in profit growth next year. Until very recently there was a big risk premium building up in equity prices, and o...