The first quarter of 2017 contained a lot of news (as well as noise) around Donald Trump and how he is faring as a president. Markets continued in a positive manner on the back of his campaign rhetoric regarding tax reforms and deregulation. However, towards the end of the quarter doubts started to form amongst investors - relating to the efficacy which Trump will be able to deliver on his promises. Very little has in fact been implemented to date and the jury is still out. As a result the reflation trade lost momentum towards the end of the quarter, specifically in Europe. Economic data from across the globe has been improving over the quarter; ''soft data'' has seen significant improvements whereas the hard data has been lagging and is much more moderate in magnitude. Going into the second quarter investors are eagerly waiting for the hard data to confirm the recovery. While it is widely acknowledged that the economy is showing signs of improvements, risks to the global economy have not disappeared. One of these risks for equity markets going forward is a significant increase in inflation without the accompanying earnings growth. Going forward the French elections could be a massive shock to markets specifically if Le Pen comes to power. However, market participants are ascribing a very low probability to such an event. On the other hand, it seems that the recent perceived market shocks, those events which were perceived as a negative at the time, namely Brexit and the Trump victory, have sent equities to all-time highs while volatility has descended to all-time lows. That being said, the bond markets have not agreed with the rosy picture that equities have painted in the first quarter of 2017, but also advanced over the quarter.

During the quarter global equity markets, as measured by the MSCI World Index rose 6.38% . Since the US elections the index has gained in all of the calendar months. For the calendar months over the quarter the MSCI World returned 2.41%, 2.77% and 1.07% respectively. Most major regions produced positive returns; Asia Pacific ex Japan led the charge, rising 11.76%, while Europe followed with a positive 7.44%, North America and Japan followed with returns of 5.88% and 4.49% respectively. As noted above, risks very much remain and not the least in Europe going forward. That being said the region did avoid perceived market risk events during the quarter. In Europe the risks that were averted were the Dutch elections, where voters remained in the moderate category and did not move more towards the right, while in Germany Angela Merkel has fared respectably in the state elections - removing some fears of a similar shake-up in political stance as in the Netherlands.

For the first quarter of 2017 global bonds, as measured by the Barclays Capital Global Aggregate Bond Index, rose 1.76%. The bond markets lost significant ground in the latter part of 2016 due to the risk-on sentiment that ensued post the US elections. The strong equity market continued, though this quarter the correlation between equity markets and bond markets reversed. Even though it is a fairly short time period - only three months - the magnitude of the swing in performance correlation of the bond markets has been very interesting. Some investors are surely shaking their heads. Over the quarter the index produced returns of 1.13%, 0.47% and 0.15%