Asset Allocation

Current views - August 2018

Cazenove Capital's investment team assesses the prospects for a range of asset classes and currencies

09.08.2018

Key

Equities

 
 
 

UK

The UK is now one of the slowest growing economies in the G7. Brexit uncertainty leads us to remain cautious.

 
 

European

Slowdown in domestic economic growth and increased trade tensions could hamper earnings.

 
 

North American

Strong US consumer and tax reform are supportive to earnings growth.

 
 

Japanese

Japan has the most accommodative monetary policy and the yen remains undervalued.

 
 

Asia Pacific

Competitive currency, strong economic growth, continued earnings growth and attractive valuation are supportive factors. Caveat to this is an escalation in trade war and USD strength.

 
 

Emerging markets

Emerging markets valuations look attractive relative to Western developed markets.

 

Fixed income

 
 
 

Government bonds

We remain negative on GBP and EUR bonds but US Treasuries are relatively more attractive given the normalisation of yields that is taking place.

 
 

Investment grade

Credit spreads provide a small pick-up in yields, but are at a historically narrow level so capital gains are unlikely. Returns will be driven by government bond markets. We see opportunities in some shorter maturity areas of the markets.

 
 

High-yield

High-yield credit spreads are at a historically low level compared to Investment Grade credit spreads, so we remain wary.

 
 

Inflation-linked

Inflation-linked government bonds remain relatively attractive compared to conventional government bonds and will outperform if inflation expectations rise, which we anticipate. 

 
 

Emerging markets

Selectively, local emerging market bonds offer good interest rate and currency exposure.

 

Alternatives

 
 
 

Absolute

Increased volatility and dispersion of returns should provide opportunities. We favour trend followers and long/short equity strategies.

 
 

Commercial property (UK)

Post-Brexit concerns have resulted in the marking down of property valuations, but income characteristics remain attractive.

 
 

Commodities

Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.

 

Author

 

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Alexander Prinz von Hessen

Alexander Prinz von Hessen

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