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Our Multi-Asset Investment Views - March 2024

We remain positive on equities, continuing to prefer a broader exposure globally as valuations outside the US look more attractive. Find out more about our views on a range of asset classes here.

25/03/2024

Authors

Multi-Asset Investments

🟢 Long / positive

🟡 Neutral

🔴 Short / negative


🔼 Up from last month

🔽 Down from last month

Main Asset Classes

🟢Equities

We remain positive on equities, continuing to prefer a broader exposure globally as valuations outside the US look more attractive.

🟡 Government bonds

We remain neutral. Expectations of rate cuts are now more realistic compared to the beginning of the year but, in the case of US fixed income in particular, valuations are not cheap enough to offset the negative carry.

🟡 Commodities

Commodity markets remain subdued, driven by strong supply dynamics. We remain neutral but maintain our positive outlook on gold, which should benefit from lower real rates.

🟡Credit

We remain neutral on credit. Valuations are extremely stretched in the US. In Europe, where there is slightly better value on offer, investors are focused on all-in yields rather than spreads currently.

Equities

🟢US

We are positive on US equities as consumer confidence continues to grow and core inflation is in line with the Federal Reserve’s (Fed) target. We see the merit in broadening out our regional exposures as valuations outside the US look more attractive.

🟡UK

We remain neutral on the UK. Although inflation has eased it remains above the Bank of England’s (BoE) target and is likely to remain higher compared to other regions.

🟢Europe

The region has been moving through its own cycle and manufacturing data is looking positive. This, in combination with attractive valuations, should benefit cyclical and growth-oriented European equities.

🟢Japan

We maintain a positive view given a solid fundamental picture, which includes competitive earnings growth.

🟡 Global Emerging Markets1

Our continued neutral stance is driven by a weak outlook on China. The region lacks the catalyst needed to spur growth.

🟡 Asia ex-Japan: China

We maintain our neutral view as ongoing fragility in the property sector and a lack of meaningful stimulus from the People’s Bank of China results in a weak growth outlook.

🟢EM Asia ex China

We maintain a preference for Korea and Taiwan as both continue to benefit from the recovery in the manufacturing cycle.

1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.

Government bonds

🟡 US

Although rate cuts expectations are now more realistic compared to the beginning of the year, valuations are not cheap enough to offset the negative carry.

🟢 🔼 UK

We have upgraded. Gilts appear to have been unduly caught up in the sell-off in US treasuries. UK services inflation should soften and help support the case for rate cuts.

🟡 Germany

We remain neutral on bunds, mainly because the ECB has provided clear guidance that it expects to start cutting rates in June, which is already reflected in market pricing.

🟡 Japan

We remain neutral. Although the Bank of Japan (BoJ) has exited from its policy of negative interest rates sooner than anticipated, we expect no material changes in bond yields yet.

🟢 US inflation linked bonds

We maintain our positive view as the sector continues to offer a hedge against the risk of higher inflation later in the year.

🟡 Emerging markets local currency bonds

Our view remains unchanged as we continue to believe that a soft landing would be supportive of a weaker US dollar and therefore EM rates. However, given resilient US data and the risk of delayed rate cuts, we remain neutral for now.

Investment grade credit

🟡 US

We maintain our neutral stance as valuations remain extremely rich and US IG continues to struggle against cash.

🟡 Europe

Valuations in European credit offer slightly better value, but investors are currently focused on all-in yields rather than spreads. We recognise that fundamentals have incrementally improved due to earnings strength but prefer to remain neutral for now.

🟢 🔼Emerging markets USD

We have upgraded to positive as although valuations appear expensive, fundamentals are strong and all-in yields are attractive.

High yield bonds (non-investment grade)

🟡US

Our view that US high yield valuations remain extremely stretched remains unchanged, and we feel this leaves little room for downside risk.

🟢 🔼 Europe

European valuations remain relatively attractive, and Europe is earlier in its credit cycle. We believe the European Central Bank (ECB) will cut first providing a further boost. We therefore prefer European credit, upgrading EU HY to positive.

Commodities

🟡  Energy

We remain neutral. Despite the renewed pledge from OPEC+ to continue production cuts through the second quarter, compliance with these cuts has been tenuous to date. In the meantime, higher non-OPEC supply is coming through.

🟢 Gold

We remain positive as we expect some normalisation in real rates as central banks start to ease later this year. Gold also offers some protection against the risk of inflation proving to be stickier than expected.

🟡 Industrial metals

Supply continues to remain tight with further downgrades to copper production this year. The lack of demand growth now overwhelms the picture as weakness in China persists.
🟡Agriculture

The divide within agriculture has become more extreme, with bumper grain harvests in Brazil leaving stock-to-use ratios at very high levels. In addition, prices of softs, such as cocoa, have been driven higher as heavier-than-expected rains constrain supply.

Currencies

🟢US $

We remain positive on the US dollar as a positive carry hedge against equity downside.

🟡🔽UK £

We are neutral on sterling. Although a global soft landing should be supportive of more cyclical currencies such as the pound, we remain on the sidelines for now given the ongoing risk of stagflation.

🟡 EU €

Although the worst of the cycle looks to be behind Europe, the ECB’s recent dovish turn following a successful period of disinflation leaves us neutral for now.

🟡 CNH ¥

The weak economic growth outlook and the announcement of disappointing stimulus leaves us neutral. However, we recognise the risk of potential CNY outperformance in the event of a larger pickup in the global goods cycle.

🟢 🔼 JPY ¥

We have upgraded to positive. The Bank of Japan’s latest key inflation forecasts suggest the bank is confident that a positive rate of inflation can be achieved and sustained soon through 2025, marking an end to its policy of negative interest rates.

🔴Swiss franc ₣

The currency offers little value for hedging equity risk. Inflation continues to be below the Swiss National Bank’s (SNB) 2% target, suggesting a rate cut is likely.

Source: Schroders, March 2024. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e., duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.

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Multi-Asset Investments

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Schroder International Selection Fund is referred to as Schroder ISF throughout this website.
Schroder Alternative Solutions is referred to as Schroder AS throughout this website.
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For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.

Schroder Investment Management (Europe) S.A. is subject to the UCITS law of 17 December 2010 and the AIFM law of 12 July 2013.