‘Complacent’ financial markets are in for a shock when global growth slows, according to from Societe Generale’s Albert Edwards.

Edwards said investors were ‘bathing in complacency’ warned that tit-for-tat US/China tariffs were ‘distracting... from the global growth slowdown lurking just beneath the surface'.

Shocks are likely to be delivered by slower Chinese growth and the pace of US Federal Reserve’s monetary tightening, he added.

Edwards said: ‘As we have often stated, investors ignore economic and market developments in China at their peril, and now once again China is a primary concern.

‘This time though it is the unfolding trade war driven by a belligerent President Trump that is drawing most attention.

‘This just diverted investor attention from the worryingly weak slew of economic data China published over the past few months, but the sudden renewed weakness in the renminbi has now refocused investor attention where it ought to be.’

He said markets’ interest rate expectations are significantly below the median of Fed projections, with the market expecting rates to peak in 2019, a year ahead of the Fed’s projections.

Edwards added: ‘The market is probably right and the Fed wrong in my opinion. The Fed always tightens until something breaks in the system and I don’t expect this time to be any different.

‘In addition the 10-2 year yield curve continues to flatten towards inversion, but once again I hear a Fed chair downplaying the shape of the yield curve as a predictor of recession. When will they ever learn?’