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January's wobble has been quickly forgotten and the bull market has resumed its march forward in February, despite the fact that macroeconomic datapoints have not changed much (confirmation of the recovery in Europe, but still at rather slow pace, of the weakening of the Chinese economy, of the domino effect in emerging markets and of mixed signals from the US economy).

The latter is a major concern because it determines whether the Western world sidestep the threat of deflation. This is why I am a bit crossed again with economists. We all know that the weather has been particularly severe in the North East, and that the loss of working days and customer traffic has obviously impacted national statistics, making any superficial reading of these potentially misleading.

However, the USA is a big country with a plethora of statistics, therefore it should be possible to look at datapoints on a regional basis, and find out whether the 3/4 of the country which were unaffected by snow storms have continued to grow at a healthy pace. Unfortunately, I have yet to have found an economist willing to do that work and be in a position to interpret the data. It seems that apart from those who were already entrenched in a view before the first snowflakes fell, economists are all waiting for "cleaner" data out of March or April. Waiting is not a luxury fund managers can afford as they are trying to chart a course for an investment strategy. So, for the moment we stick to our scenario of continued growth for the US economy.

In my January comment, I had noticed the below average level of geopolitical tensions and considered this as a positive factor for equity markets. I guess I am not much of geopolitical strategist because it took just 2 months for me to be proven wrong with tensions between Russia and NATO at their highest since the end of the cold war. The West has got nothing but commercial and financial sanctions in its arsenal to respond to Russia's partial annexation of Ukraine. Putin has time and space working for him, but the state of the Russian economy is the chink in his armor. The one day 13% fall in the MICEX had much more influence on the Russian president's decision to tone down his rhetoric than Obama's sudden martial stance or an hour-long telephone conversation with Angela Merkel.  Both sides are afraid of the risk of escalation, and rightly so. This is the reason why it is not time yet to prepare for the worst.

Lionel Rayon

Lionel joined Schroders as part of the acquisition of Cazenove Capital in the summer of 2013, having been at Cazenove since 2005. He is a senior member of the pan-European equity team and manager of the Schroder ISF* European Alpha Absolute Return (circa $1 Billion AuM). He is also responsible for developing and maintaining a fundamental and valuation screen of European stocks. The screen forms the basis for generating ideas for potential further detailed investigation by the European team within the framework of their disciplined Business Cycle Approach. Lionel joined from Citigroup where he was a Director in the European Tech Research Team. Prior to Citigroup, Lionel had been with Schroders Securities, as a French specialist, Nomura Research Institute, as a metals & mining specialist, Enskilda and Chevreux de Virieu. Lionel graduated from Indiana University (MBA) and Institut d'Etudes Politiques de Paris (BSc economics & finance). He has 20 years of equity research experience.

Website: www.schroders.com

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