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The world economy: watch but don’t panic

The financial warning light is not yet flashing red but has turned orange

By Duncan Weldon   March 2019

Photo: Sachs Ron/CNP/ABACA/ABACA/PA Images

The violent correction of the fourth quarter of 2018 took the year’s stock market returns negative. After commodities sank and, over the course of the year, bonds failed to offer a safe haven, this rounded off a grim year for investors. The losses may not have been so large, but there was nowhere to hide. Cash really was king.

As well as being bearish, markets felt very volatile—but in reality they were not. The Vix index (a measure of expected US stock market volatility) averaged 16.6,…

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