In a world where a significant segment of government bond yields continue to hover in or near negative territory, the credit cycle looks to be nearing its end, and the devaluation of sterling is dominating the agenda, we are increasingly mindful of the threats to risk assets that are looming on the horizon.

According to Luc Luyet and Frederik Ducrozet, Asset Allocation & Macro Research, Pictet Wealth Management, the sharp drop of the sterling on Friday 7 October at the start of trading in Asia with the currency declining 6% in the course of twenty minutes was the climax of a particularly tough week for the currency.

Given the economic and political headwinds and shocks we have experienced in the first six months of 2016, the summer could easily have been characterised by uncertainty and volatility.

The post-ECB correction observed since last Friday confirms our view described in August and again last week in our latest Asset Allocation monthly publication: after a historically calm summer, September is likely to be a month of transition towards more volatility.

Global stocks are up year-to-date, having shaken off worries about the strength of the global economy in the wake of the UK's Brexit vote. But we believe further gains require a meaningful improvement in corporate earnings, particularly in developed markets.