THIS year has rewarded those investors that kept faith with equities and the US dollar. Global equity markets have returned around five per cent, led by US stocks, which returned around 10%, and helped by a 12% gain in corporate earnings.

Despite a heap of challenges, even the UK equity market has made a gained, albeit of just 0.2%. The US dollar, this year’s currency of choice, has risen by 4% against sterling. The rise in US stocks and the dollar have been on merit, with economic growth in the US rising twice as fast as in the UK.

Beyond supportive earnings and economic growth, worrisome concerns remain. President Trump’s trade policies, erratic and unpredictable in their delivery, are generating an uncertain real-world impact. Those hoping their use will fade after the mid-term elections are likely to be disappointed: having found tariffs an effective weapon, Trump is unlikely to refrain from using them.

A fresh challenge to the eurozone’s status quo should come from the new, anti-everything Italian government as it revises Italy’s fiscal policies. Optimism that the budget deficit will stay within eurozone limits have probably been undone by the Genoa tragedy and spending could potentially soar.

Investors have contended with a rolling emerging market crisis that looks far from finished while the US Federal Reserve lifts US interest rates. The dramatic events in Turkey are, as with Brazil and Argentina, having only a limited financial impact on developed markets as linkages are modest. But this may not be the case if Chinese equity markets, which are already down 18% year to date, fall lower as its slowing economy, driven by earlier credit controls, bumps hard against Trump’s tariffs.

US markets completely dominate global equity indices and investors have enjoyed the US having a bellicose cheerleader in Trump. His moves to redistribute wealth shouldn’t necessarily be a generalised negative. In taking aim at the Federal Reserve, however, the king of superlatives risks taking things too far.

Fifteen years ago now-ex Fed chair Ben Bernanke wrote the playbook on dealing with deflationary financial shocks. While the world’s major central banks have followed it faithfully since the credit crunch, all stopped short of the nuclear option - explicit and direct currency depreciation – not least because of its beggar-thy-neighbour implications.

Trump was always going to have a problem with the US dollar. He clearly loves the validation of him and his policies that a rising dollar implies, but a higher US dollar nonetheless eventually erodes US competitiveness. While investors have learned over many decades - and to their cost - not to fight the Fed, Trump has taken aim.

Although a Trump appointee, current Fed chair Jerome Powell appears not to be the President’s lackey. Speculation is growing that the US Treasury could use its powers to intervene in the currency markets and sell the US dollar. Acting to impoverish trading partners clearly holds no fears for the White House.

If so, then the implications for equity investors could, however, be no less severe than if, alternatively, Trump tried to exercise direct control of the Fed. As the ultimate disruptor perhaps Trump risks coming too close to home.

In the short term, consolidation in equities looks possible. Good US economic data is being met by profit taking as economists characteristically overcook forecasts following this summer’s US tax-cut-boosted boom.

It is too early, however, to call the top in equity markets. Companies are growing profits and increasing capital investment programmes while central bank policies remain accommodative. Even in the US, and after several rate hikes, cash is still unattractive in real terms. You should worry when markets appear risk-free. We are far from that point currently.

Stephen Jones is chief investment officer at Kames Capital.