Reading Time: 3.1 minutes The third quarter of the year has seen a continuation of the positive tone in global equities, although the UK market has struggled for traction. Markets have taken a plethora of news in the period in their stride including the North Korean tensions and a more hawkish tone from the world’s central banks. Interestingly the S&P 500 in the US has made a new record high in 18 of the 38 weeks in 2017. We have continued to see incredibly low levels of volatility and have had no periods of meaningful equity market pullbacks. After appearing to turn more dovish at the beginning of the quarter, it became clear as the months progressed that the MPC would like to see an interest rate increase. This will likely come in November and represents an important reversal of last year’s post Brexit vote ‘panic’. The economy will deliver 1.5% GDP growth this year, falling to 1.3% in 2018. More importantly, the economy is virtually at full employment but surprisingly there has been a sharp fall in the savings ratio to below 2%. Brexit concerns have certainly fed through into the central London property market and a rolling over of consumer confidence. The overall view on the US economy remains robust with positive consumer confidence combined with good corporate sector strength. Growth in 2017 will to some extent be influenced by the recent hurricanes but 2% looks reasonable, with a similar figure for 2018. Once again, the authorities have been surprised by the lack of inflation in the financial system and are viewing it as a mixture of transitory factors. Jobless claims remain at incredibly low levels, although the recent slowdown in housing starts is surprising in the context of reasonable affordability and low stock levels. The shift in global asset allocation earlier in the year has meant strong inflows have continued into Continental Europe and there have been some strong stock performances. Economic growth has continued to surprise to the upside and lower political risks have added to the largely benign environment. GDP growth in the current year will likely be 2.2%, slowing marginally to 2% in 2018. Nagging doubts remain about the region with lacklustre consumer credit growth, a strong currency and poor demographics all contributing to slower growth. On a corporate level, there has been no cumulative European earnings growth since 2011. The Japanese economy has now witnessed six quarters of consecutive economic growth, which is the longest winning streak in over a decade. GDP growth in the current year is forecast to be 1.6%, with a similar level in 2018. Stimulus measures continue to be important for the economic recovery, notably public investment. Positively, capital expenditure programmes have been beating expectations, notably in machinery. The outlook is positive and with exports adding meaningfully to the trend, the country should be well supported despite strong stock performance already. Chinese growth remains robust but has been moderating in recent months as exports have slowed. There has also been some slowdown from tighter environmental policy and implementation. GDP growth in the current year will still be 6.8%, moderating to 6.4% in 2018. Longer-term challenges remain with low productivity growth and most worrying, the mounting debt problem. Credit intensity remains high and much of the funding is reliant on the short-term wholesale market. In the US, the S&P 500 index has risen nearly 3%, whilst the Dow Jones is up 4.5% with the NASDAQ up 4%, despite some signs that technology sector investors are becoming increasingly nervous of valuation levels. Gainers on the period included Boeing, which was up an impressive 29% on optimism surrounding new orders. Commodities were also positive and Chevron rose 13%, Newmont Mining gained 18% and Freeport McMoran rose 16%. Other stocks to rise included The Gap up 33%, Dollar Tree up 21% and Ralph Lauren up 20%. On the negative side, Under Armour dropped 25% on increased competition and poor sales. Nike also suffered from the same fears and lost nearly 10%, while L Brands fell 20%. Other fallers included Mattel down 30%, Viacom down 18% and Everest Re lost 14% on the hurricane activity. In the UK, the FTSE 100 is virtually unchanged over the period, with Brexit volatility, currency movements and future interest rate activity dominating sentiment. Smaller Companies have continued their outperformance gaining 1.5% and the AIM All index rose 3%. There was some takeover activity in the quarter with Worldpay up 30% on a confirmed US bid. With commodities firm, Anglo American gained 29%, Glencore was up 22% and Antofagasta gained 17%. Other gainers included Next up 38%, Sports Direct up 38% and Pets at Home up 33%. There was some pain in the Building and Support Services sector with Carillion falling 70% and Interserve lost 50%. Political risk hit stocks such as Petra Diamonds down 40% and Acacia Mining down 36%. Continental European markets were very much in focus and delivered some excellent positive returns. The best performing country was Italy up 10%, whilst France gained 3.25%, Germany rose 2.85% and Switzerland was up 2.35%. Hapag-Lloyd rose 45% and reflected a much healthier outlook for the global shipping sector and in particular containers. Other stocks to rise included Yoox Net-a-Porter up 33%, Norsk Hydro up 26% and ASML Holding up 23%. On the negative front, Gemalto lost 27%, Carrefour fell 23% and National Bank of Greece lost 20%. Asian equity markets were also in positive territory over the quarter with the Nikkei in Japan up 1.65%, the Hang Seng in Hong Kong gained nearly 7% and China was up 4.5%. The fears over North Korea meant that the KOSPI in South Korea fell 0.78%, which was still relatively muted. Stocks to rise included Japan Steel up 48%, Mitsui Mining up 32%, and Santos in Australia rose 35% on the firmer crude oil price and Tencent rose 21%. On the downside, Asahi Glass lost 11%, Konami fell 13%, Lenovo declined 13% and Hankook Tire fell 8%.