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.

For the quarter European equity markets, as measured by the MSCI Europe Index, rose 7.44% . The region has been plagued with concerns regarding the continuity of the European Union with several elections over the time period as mentioned above. Notwithstanding those, returns were positive over all three calendar months whilst March stood out as the main contributor for the quarter. This could be attributed to the softening of expectations and the accompanying fears of a Le Pen victory. Brexit talks have largely continued as expected albeit with only some minor challenges coming from Scotland on another referendum vote. There is talk in the market that the European Central Bank might want to raise interest rates back to zero to normalise the financial industry as the negative rate policy has not been effective. Over the quarter the index returned 2.08%, 1.19% and 4.02% respectively.