Tim Fox

Last week saw an abrupt reversal in market sentiment after a period of exceptionally low volatility and an extended period of minimal market corrections.

Unless something unforeseen happens between now and the June Federal Open Market Committee meeting, it seems likely that the Fed will raise interest rates again.

The fund now expects the UAE’s economy to grow just 1.5 per cent this year (from a previous estimate of 2.5 per cent and down from an estimated 2.7 per cent growth in 2016).

The Federal Reserve's spring-like optimism is at odds with the deteriorating political environment in Washington.

The UK economy has performed well since last summer’s Brexit vote, leading the BoE and IMF to revise up their GDP forecasts.

Speculators have also played their part in the rollover in price. Although speculative investment in oil futures cooled somewhat in the previous week, the benchmarks were still heavily weighted towards long positions by the middle of last week.

Fiscal policy reform was to the financial markets the cornerstone of the Trump manifesto, but until now investors have been disappointed by the greater focus on immigration, the media, the judiciary and other issues.

If this is indeed a new start in the approach by Donald Trump to international relations, it is likely to be welcomed by the markets.

So far the only details about Donald Trump’s policies related to corporate tax reforms have been expressed as a way of penalising imports and boosting exports, couched as a means of forcing Mexico to pay for its border wall.

The main feature of the Trump fiscal plan is for a stimulus worth between US$5 trillion and $8tn over 10 years, broken down between tax cuts of $4-$6tn and spending increases of $1tn.

While doubts about what the Trump presidency will really look like still remain, the transition is going relatively well with key appointments being seen as positive for growth.

It is the uncertainty of a change in policy under a Trump presidency that is triggering some of the traditional signs of investor risk aversion.

The country has to be careful about encouraging growth while not depending on investment fuelled by fiscal spending and credit growth.