Our multi-asset views - September 2018


Asset classes



Despite the expected market impact from US trade policy, we believe a future move away from politically-focused markets will create positive opportunities in equities.


Government bonds

Despite cyclical headwinds, growth appears robust and we believe a further rise in yields is required to catch up with the improved backdrop.



Top down the cyclical environment is positive for commodities; on a bottom-up view most sectors are supported by tight supply and demand characteristics.



Following a brief period of relief in July, August saw spreads resume widening although this was mitigated by government bond moves across investment grade in all regions.





We continue to have regional preference for the US given the resilience of corporate earnings.



Our view on eurozone equities remains unchanged, as we take into account global trade tensions and tightening financial conditions.



We are neutral as we believe the market is still dominated by the political noise with little sign that this can be resolved soon.



While weakness in macroeconomic data and cyclical indicators suggest a slowdown, attractive valuations keep us neutral.


Pacific ex-Japan

Momentum indicators have declined in the past couple of months but we see areas of opportunity at the regional level.


Emerging markets

Despite a fall in the momentum indicator for emerging markets, especially China, we remain positive as valuations are starting to look attractive.


Government bonds



Treasuries continue to look expensive. Given the Federal Reserve’s tendency to telegraph rate hikes we do not see the pace of tightening as an issue.



Valuations remain expensive. Uncertainties around Brexit continue and further rate hikes may not materialise until a credible Brexit plan comes together.



Bunds remain expensive. As the European Central Bank steps away from quantitative easing, the market will have to focus on whether low yields are sustainable.



We believe that inflation is the critical factor in whether the Bank of Japan might consider normalisation. We expect the current monetary policy stance to stay in place until inflation is close to target.


US inflation linked

We remain positive on US inflation. While seasonal effects will turn negative, our latest research suggests that stagflationary fears will trump this technical factor.


Emerging markets local

We remain neutral as cyclical headwinds prevent us from taking advantage of the improvement in local market valuations.


Investment grade (IG) corporate bonds


US IG corporate bonds

Fundamentals may be starting to weaken as shareholder friendly behaviour becomes more prevalent, to the detriment of bond holders.


European IG corporate bonds

European corporates are in a stronger position, though the recent pickup in merger and acquisitions and shareholder activism is indicative of a maturing cycle in the region.


Emerging markets USD

We believe that the regional mix and positive earnings growth marginally favours EM corporates and sovereigns over their developed market high yield counterparts.


High yield bonds



High yield is expensive and vulnerable to outflows, with technicals in particular unlikely to be as favourable as they were in the first half of the year.



Continuing political instability in the region is likely to limit spread tightening, hence we retain our negative view.





Global oil inventories are low; over the next six months there are risks to supplies from a number of OPEC countries that could lead to a spike in oil prices.



Downgrade to single negative driven by our momentum signal and the increase in US 5-year real yields. Gold has not materially reacted to protectionist politics.


Industrial metals

Industrial metals look oversold on risks to global trade, fundamentals are supportive and China looks set to boost demand with increased infrastructure spending.



The recent sell-off has been based on concerns over trade war escalation as opposed to fundamentals; in addition, the risks relating to El Niño look to be underpriced.




US dollar

Despite the dollar being expensive, we see room for further deterioration in growth and political sentiment against a continued backdrop of tight liquidity.


UK sterling

We no longer see a strong case for excessive sterling depreciation given that hard Brexit, having emerged as a serious possibility, now appears mostly priced in.


Euro €

The euro has been downgraded on further economic slowdown and increased political tension between core and periphery.


Japanese yen ¥

The Bank of Japan is now seen as being forced to lift-off from its extremely dovish stance; weak external growth should also support the yen as a risk-off currency.


Swiss franc ₣

We remain neutral - with its status as a safe haven currency, the Swiss franc should see relative outperformance vs. the euro.