Our multi-asset investment views for July 2019



Markets continue to be supported by liquidity. There were further dovish comments from both the US Federal Reserve (Fed) and the European Central Bank (ECB) over the month, with both central banks focused on pre-empting further economic weakness and suppressing the potential appreciation of their respective currencies. The challenge for markets is that global trade data remains soft. Our cyclical indicators point to waning economic momentum. There are also some concerns about the Fed’s ability to ease aggressively when confronted with the strength of the US labour market.

We still like carry strategies, such as high yield debt and foreign exchange (FX) carry, because they benefit in a low interest rate environment. Equity positions are neutral as we await more clarity on the cyclical picture.

We upgraded our exposure to emerging equities last month, on the view that they offered value against the backdrop of a pro-active Fed. Our view on Europe is neutral, reflecting that ECB policy turning more stimulative, thereby capping European yields and the euro, which in turn provides some support to the equity market. We remain negative on Japan given its cyclical sensitivity and the strength of the Japanese yen.

We took profits on our long duration exposure last month, but are biased to add back if yields rise because of our concerns about growth. Similarly, we also took profits on our gold position after a strong rally, but are minded to add back on weakness. We are still long on US dollars as a hedge against our risk positions, which are exposed to any reduction in expectations of central bank liquidity.

Asset classes



With weakening economic momentum set squarely against support from dovish central banks, we retain our neutral stance.


Government bonds

Although valuations look stretched, positive momentum and soft cyclical indicators point towards maintaining a positive view on bonds as defensive positions in portfolios.



We remain neutral overall on commodities with negative carry and momentum offset by our positive view on gold as a hedge against increased liquidity and geopolitical risks.



Although credit spreads tightened in June, supportive technicals and a more benign backdrop for credit offset longer-term concerns over fundamental credit quality.





Valuations have deteriorated slightly, but momentum remains amongst the strongest in the major markets.



Uncertainties around political leadership may keep investors away from UK equity markets and the risk of a sterling bounce in the longer term is a concern.



We remain neutral. A dovish Fed may lead the US dollar to weaken against the euro and cast doubt on the recently improved European earnings outlook.



Momentum is showing signs of a recovery, but export weakness remains an area of concern. No change to our neutral view.


Pacific ex-Japan

Singapore export weakness remains a drag on the region and momentum is lagging. We continue to hold a neutral view.


Emerging markets

A positive G20 outcome may alleviate near-term pressures, but trade concerns are unlikely to abate. Selecting markets with a stronger domestic focus should mitigate trade risks.


Government bonds



No change to the conditions that prompted last month’s upgrade. The cyclical outlook still looks weak and US-China trade war rhetoric shows few signs of abating.



Gilts could profit from further political uncertainty in the UK. In particular, the increasing threat of a “No-Deal” Brexit.



We upgrade to double positive. Increased liquidity, investors seeking yields higher than cash rates and the ECB opening the door to more stimulus should benefit longer duration bonds.



Given export weakness on the back of the continuing trade war situation, we remain positive.


US inflation linked

Our positive view on US break-evens is unchanged. They offer a useful hedge against potential increases in inflation, driven by higher oil prices.


Emerging markets local

Upgrade to single positive. More dovish tones from major central banks should provide support as investors search for yield.


Investment grade (IG) corporate bonds



Although technical data has improved, valuations have deteriorated so we retain our neutral stance.



Dovish statements and appointments at the ECB have increased expectations of continued accommodative monetary policy, creating a supportive refinancing backdrop.


Emerging markets USD

We remain neutral. Spreads tightened again in June, leaving valuations still looking unattractive.


High yield bonds



Although concerns over fundamental credit quality remain, these are offset by supportive technicals and a more benign backdrop for credit.



Valuations are less appealing after the recent spread tightening, but fundamentals still look attractive.





As OPEC struggles to agree the next output cuts, the impact of mounting geopolitical tensions is offsetting the effects of weakening economic sentiment.



Gold is being supported by dovish Fed comments and picked up further momentum on the back of escalating geopolitical tensions in the Middle East.


Industrial metals

With upsides capped by cyclical headwinds and downsides limited by central bank dovishness and increased Chinese fiscal stimulus, we remain neutral.



We maintain a negative stance on agriculture this month, given the negative carry. We await more clarity on production and Chinese imports before making any changes.




US dollar

We continue to like the US dollar as a hedge against adverse impacts on risk assets from reduced expectations of central bank liquidity.


UK sterling

Our view on the pound remains negative as the increased probability of a “no-deal” Brexit compounds the effects of weak economic data.


Euro €

The ECB’s recent movement towards increasing stimulus is a headwind for the euro so we maintain our neutral view.


Japanese yen ¥

The yen’s safe haven status could prove beneficial in an environment where economic weakness persists.


Swiss franc ₣

Contagion from weak European industry is impacting Switzerland, leading us to keep our neutral position on the Swiss franc.