Our multi-asset views for April 2018


Asset classes



We maintain our positive view as we believe support from earnings growth will be strong enough to offset de-rating risks that are typically seen late in the cycle.


Government bonds

There is potential for a short-term consolidation rally but the medium term picture remains negative given growth and inflation pressures.



We remain positive given the supportive cyclical environment and on-going supply-side discipline. Short-term momentum continues to build while carry has improved.



Despite slightly improved valuation, weaker investor flow momentum and fundamentals offer limited support moving forward.





Valuations continue to remain elevated; but strong momentum in earnings revisions supported by strong economic growth and tax cuts support our positive score.



We expect European growth to remain strong but remain cautious given the strength of the euro.



We hold our view on UK equities, keeping it neutral with the continued risk of sterling appreciation and very early signs of recovery.



We continue to believe in higher earnings potential, but the timing of upward revisions to earnings forecasts may be delayed due to current headwind from the strong yen.


Pacific ex-Japan

While we remain positive on the region, we are now neutral on Australia due to domestic structural issues and mixed data.


Emerging markets

We continue to expect strong earnings growth against a favourable macro backdrop and recovery in global trade.


Government bonds



The strength of US activity implies a pick-up in core inflation. Forecasts imply much higher Treasury yields yet to come.



We are sceptical that the Bank of England will be able to hike before November, with data not supportive of the May hike the market predicts.



Germany is our main short in the overall score, with an expectation of a more hawkish European Central Bank than the market is pricing.



We see some downside risks, but as the Bank of Japan’s expansionary policy remains unchanged, so does our neutral view for the time being.


US inflation linked

No change to our view as valuations are still reasonably attractive, although we are approaching our initial target so will monitor.


Emerging markets local

We remain positive as there seems to be no imminent threat from inflation and EM countries still tend to be in mid, rather than late cycle.


Investment grade credit



Offers unattractive risk/rewards. We expect spreads to trade sideways to wider on renewed uncertainty, amid a new higher volatility regime.



Spreads are currently supported by foreign flows and ongoing commitment to the Corporate Sector Purchase Programme, but there is limited room for error.


Emerging markets USD

We keep a neutral view on EM sovereign credit, and prefer EM corporate due to the higher credit quality and larger Asia tilt.


High yield credit



The fundamental picture remains generally stable. Demand has improved due to oil price stabilisation, improvement in earnings and falling default rates.



Interest coverage is back to pre-global financial crisis levels and net leverage has decreased. Valuations however are already reflective of the improved backdrop.





The continued OPEC production cuts should push the crude market into a small deficit this year, even accounting for the increase from shale, while carry remains positive.



We remain negative on gold which is looking expensive relative to its long-term historical relationship with real rates.


Industrial metals

The main drivers remain supportive: a weak dollar; current supply versus demand; and the robust Chinese manufacturing purchasing managers’ index.



Looks set to benefit from a multitude of positive factors – the weak US dollar, favourable supply/demand dynamics and declining agricultural stockpiles.




US dollar

We continue to believe that a weak or stable dollar environment will persist in the medium term as cost of liquidity keeps increasing without higher growth.


UK sterling

Brexit headwinds continue to impact the currency, although relatively cheap valuations can provide some buying opportunities.


Euro €

We expect the pace of euro strength to moderate in the coming months.


Japanese yen ¥

Concerns regarding trade wars and strong JPY, as escalation of tensions would hurt trade-sensitive Asian FX the most.


Swiss franc ₣

No change in view - we continue to expect little intervention by the Swiss National Bank.


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Multi-Asset Views April 2018 3 pages | 210 kb