Our multi-asset investment views - July 2018


Asset classes



Our models suggest equity valuations are fair versus long-term history but look more expensive versus recent history.


Government bonds

We remain negative on duration. Valuations are still slightly expensive and we see risks to the downside, but are wary of downgrading further during the summer lull.



We have upgraded commodities this month after the recent correction as cyclical indicators have stabilised and carry remains strong.



A sharp deterioration in sentiment and rising US dollar rates has created an unfriendly backdrop for credit spreads.





The US continues to be the most resilient economy. We expect strong earnings growth to continue, offsetting potential risk de-rating.



Despite attractive valuations and a weaker euro, headwinds such as concerns around global trade and tightening financial conditions remain.



Uncertainties around ongoing Brexit negotiations continue to weigh on UK equity growth potential.



We remain neutral on Japan as recent weakness in macroeconomic data and cyclical indicators point to a slowdown. Further yen strengthening would be a risk.


Pacific ex-Japan

Within the region, we have removed our positive bias for Singapore following the unexpected new property cooling measures that were announced recently.


Emerging markets

Valuations are attractive compared to developed markets, though trade war escalation and a stronger dollar may be near-term headwinds.


Government bonds



Still expensive against a backdrop of a negative term premium, a large increase in supply and higher currency-hedged yields available in Europe.



Remain negative. Gilts are still expensive after recent outperformance.



The European Central Bank reaffirmed its intention to end its bond-buying programme this year, and economic growth should pick-up after the Q2 soft patch.



Although yields are low and investors expect the Bank of Japan eventually to follow the Fed and ECB in reducing/removing stimulus, it’s too early to downgrade.


US inflation linked

We are currently positive on US breakeven inflation but expect seasonality to turn negative, so are considering taking profits.


Emerging markets local

No change for now, but valuation improvements point towards a possible upgrade if the cyclical backdrop improves.


Investment grade (IG) corporate bonds


US IG corporate bonds

Leverage is rising again in the US in spite of very strong earnings. There is increasing pressure on management to prioritise shareholders over creditors.


European IG corporate bonds

European corporates are in a stronger positon, though the recent pickup in M&A and shareholder activism is potentially indicative of a maturing cycle in the region.


Emerging markets USD

We believe that the regional mix and fundamental path of earnings marginally favours EM corporates over sovereigns.


High yield bonds



Demand remains strong, supported by a robust domestic economy in the US. But from a valuation perspective, we believe it is expensive and vulnerable.



Political flare-ups in the eurozone look likely to cap the potential for spread tightening, hence we downgrade.





Oil supplies remain tight amid robust global demand, while falling Venezuelan output and Iranian sanctions continue to offer support.



We have upgraded gold as the price recently corrected and the relationship between gold and interest rates has now normalised.


Industrial metals

We remain positive on industrial metals, which are more attractive after the recent losses as the cyclical environment stabilises.



The recent correction relates to trade war concerns rather than fundamentals, so we remain positive.




US dollar

Strong US growth and political risks have fuelled the recent dollar rally, pushing USD to near-expensive levels again.


UK sterling

Internal turmoil for the UK government keeps us negative, even as hard data has improved.


Euro €

European political risks and the H1 soft patch have been mostly priced in. A more confident European Central Bank and future better data could mark the bottom for EUR.


Japanese yen ¥

We see JPY continuing to trade range-bound as the Japanese economy improves and the Bank of Japan reduces bond purchases.


Swiss franc ₣

Stay neutral on CHF on better European economic data, with the Swiss National Bank staying dovish.