Yet, forward looking indicators suggest that the global economy continues to grow strongly. The global purchasing manager indices, indicators of the health of the manufacturing sector, remain well above the ‘50’ level , signalling continued expansion. Analysts also expect company earnings to remain healthy over the next 12 months in both the developed and emerging markets.

Softer economic data can still be supportive for financial markets, as long as the slow down remains moderate. This is because central banks will only raise interest rates gradually if at all, in such an environment.

The decisions by both the European Central Bank and the Bank of England to leave interest rates unchanged in March confirm this. The Bank of Japan (BoJ) has also hinted that interest rate hikes are likely to be later rather than sooner. Over in the US, the Federal Reserve kept interest rates unchanged in May despite earlier concerns over rising inflationary pressures.

As investor expectations over global growth have fallen, economic data can now beat lowered expectations.

This, in turn, sets the stage for equities to perform better in the second half; many regional markets are not only trading at attractive levels, companies are also delivering on strong earnings forecasts.

While equities remain the asset of choice, that does not mean there are no opportunities within fixed income. A slower pace of interest rate hikes strengthens the case for shorter duration bonds, which look attractive following the correction we have seen in the bond markets since the start of this year.

Find out where the opportunities lie by reading our 2018 Mid Year outlook article “It’s time for a strategy shift”.