The standoff between the US and China has created a rut in the financial markets and has created uncertainty in the outlook for the world economy.

With weekly jobless claims hitting a 49-year low in the US, the Federal Reserve may soon reverse their dovish outlook which, in turn, could end the 10-year bull market in stocks, opined former Goldman Sachs Asset Management Chairman Jim O’Neill.

In an interview with CNBC, O’Neill said that any suggestions that the Federal Reserve was tightening would upset both the US bond and stock markets.

“The idea that maybe the markets were right all along and the Fed will be tightening by the end of the year is not crazy in my view. We might be entering the end of the 10-year almost clear bull market in equities. The kind of volatility we have seen in the last six months is very different from the past 10 years,” the former Goldman executive noted.The standoff between the US and China has created a rut in the financial markets and has created uncertainty in the outlook for the world economy.

While the US has campaigned for significant changes in China’s economic and trade policies, the latter wants Trump administration to lift expensive sanctions on Chinese goods.

The negotiators from both countries are currently in the ninth round of talks to resolve the dispute and investors and corporations are waiting to see whether the preliminary talks would lead to a summit between Donald Trump and Chinese President Xi Jinping.

O’Neill added that around 85 percent of the positives in the world economy since the turn of the decade come from the two superpowers. Hence, any summit agreement between them needs to be considered as a “big deal”.

He further said that the latest set of Goldman Sachs’ data suggests that the global economic conditions could soon arrest the decline of US and China.

“Since last November they have all been going down, In the past fortnight, the signs of them stabilising. That in itself is a relief,” O’Neill said.

source:  moneycontrol.com