ResearchDeutscheBankTheHouseViewAhealthypullbackDISCLOSURESANDANALYSTCERTIFICATIONSARELOCATEDINAPPENDIX1.MCI(P)083/04/2017.7February2018marcos.arana@db.commatthew.luzzetti@db.commichael.hsueh@db.comDistributedon:07/02/201807:11:00GMT7T2se3r0Ot6kwoPaResearchDeutscheBankTheHouseView–7February2018thehouseview@list.db.comhttp://houseview.research.db.comMonthinReview2Bloomberg,26-Jan-2018FT,25-Jan-2018FT,14-Jan-2018Reuters,22-Jan-2018DW,18-Jan-2018CNBC,24-Jan-2018CITAYA.M,24-Jan-2018Reuters,25-Jan-2018FT,26-Jan-2018TheIndependent,26-Jan-2018Bloomberg,25-Jan-2018FT,23-Jan-2018FT,28-Jan-2018LosAngelesTimes,17-Jan-2018Bloomberg,26-Jan-2018Reuters,26-Jan-2018Bloomberg,2-Feb-2018Bloomberg,5-Feb-2018FT,5-Feb-2018MarketWatch,2-Feb-2018ResearchDeutscheBankTheHouseView–7February2018thehouseview@list.db.comhttp://houseview.research.db.comAfterastellar2017andanevenstrongerJanuary,riskassetshaveundergoneasharppullbackinthelastweek.Initiallytriggeredbyhigherratesasmarketsrepricedinflationexpectationshigher,theepisodeevolvedintoatechnicalspoutofvolatilityexacerbatedbyprogrammaticstrategies.Thepullbackishealthy,afterahighlyunusualstretchofmarkettranquility.Forinstance,theS&P500hadnothada3%pullbackinover300tradingdays;marketpositioninghadbecomestretched.However,themovesnowappearoverdone.Wearenowwellpastthetypical3-5%pullback,andthesell-offhasgonebeyondthatduring2013’sTaperTantrumwhichwastriggeredbyamuchsharperriseinrates.Fundamentalsremainsupportiveofriskassets.Therobust,broad-basedglobalexpansioncontinuesandinflationwillatlastacceleratein2018.Weexpectthesetrendstoevolvesteadilyenoughforcentralbankstotightenmonetarypolicygraduallyasplanned.Stronggrowthandrisingbutnothighratesshouldcontinuetosupportcorporateearningsandequityvaluationsevenasbondyieldssteadilyrise.Still,weexpectmarketturbulencetoreturnthisyear.Pullbacksandvolatilitywillbecomemorecommonasinvestorsadjusttorisinginterestratesandcapitalisallocatedoutofriskassetsandintohigher-yieldingfixedincome.Morevolatilityshouldnotder...
