Our multi-asset investment views - September 2021





We remain positive with earnings expectations holding firm and real interest rates supporting valuations.


Government bonds

The strength of economic momentum has diminished whilst peak liquidity (when the availability of funds is at its most ample) appears to be behind us. This will therefore be a key headwind going forward.



Vaccine distribution and fiscal stimulus continue to drive stronger demand whilst supply conditions remain tight.



We maintain our negative score, and although fundamentals are improving, valuations remain close to extreme levels across the board.




Upward earnings revisions are starting to moderate, suggesting a manageable hurdle for Q3 earnings. Companies continue to focus on shareholder friendly actions whilst consumer spending remains strong.



We continue to hold our neutral view as we prefer to express our cyclical bias elsewhere.



Europe is our preferred market as economic growth remains strong. This is supported by the rebound in the pace of vaccinations and the continued monetary support from the European Central Bank (ECB) (monetary support involves policymakers attempting to manage economic fluctuations through the use of interest rates and unconventional monetary policies such as quantitative easing).



Despite the strong recent rebound, we see little reason to expect the market to lead at this stage.


Global Emerging Markets1

Although valuations are attractive, vaccination rates remain low in many markets, suggesting their economic recoveries will be uncertain.

Asia ex-Japan



We remain on the side-lines. While valuations have undoubtedly cheapened recently, they were previously trading at decade highs. Current levels therefore look fair, especially for long term investors.



EM Asia ex China

Whilst we continue to like the long-term story for Korea and Taiwan, investor sentiment has declined given global growth appears to be peaking. We therefore expect this to weigh on the market in the short term.

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

Government bonds



We maintain our double negative score as we expect the Federal Reserve (Fed) to start tapering in Q4, therefore providing a catalyst for yields to move higher (lower prices).



Gilt yields remain close to their historic lows despite the economy rebounding following the removal of restrictions. Additionally, the Bank of England continues to taper its quantitative easing programme.



We downgraded our view as local inflationary dynamics have become more of a headwind for the region whilst communication around policy post the Pandemic Emergency Purchase Programme remains unclear.



The Bank of Japan continues to manage the yield curve whilst Covid-19 restrictions are likely to continue to weigh on activity.


US inflation linked bonds

Flows increased recently on the view that recent rises in inflation will be transitory. The Fed’s hawkish (policymakers are often described as hawkish when expressing concerns about limiting inflation) comments on tapering indicate inflation expectations are priced in.


Emerging markets local currency bonds

Potential strengthening of the US dollar, poorer handling of Covid-19 and concerns over fundamentals in some EM countries mean we maintain our neutral view.


Investment grade credit



With low credit spreads offering small returns, we remain concerned that US IG could be highly vulnerable to shifts in sentiment, market technicals and rising rates. The credit spread is the margin that a company issuing a bond has to pay an investor in excess of government yields and is a measure of how risky the market perceives the borrower to be. 



Despite credit spreads remaining tight and valuations appearing stretched, we prefer EU IG over US IG due to the increased support from the ECB.


Emerging markets USD

Valuations stand out as attractive in the global corporate credit universe with credit conditions broadly benign, bolstered by a slight shift in stance towards easing in China.


High yield bonds (non-investment grade)



We remain negative. Default rates are still low but are marginally higher than in the first quarter and valuations remain at extremely expensive levels.



We upgraded our view following improved fundamentals, low default rates and marginally wider credit spreads relative to US high yield.





We believe energy prices could grind a little higher as the demand for oil continues to return and the global energy market remains under pressure.



We remain neutral, although we still see some opportunities for the price to rise from current levels and converge with higher real yields.


Industrial metals

The policy stance in China has turned more proactive amid weakening data whilst demand outside China continues to pick up strongly given the global recovery.



We remain neutral as prices approach historical highs whilst weather volatility has resulted in supply disruptions.




US $

We remain neutral on the US dollar as we wait for a clearer catalyst for a sustained trend. However we see value in using the US dollar for diversification.


UK £

Our view remains unchanged. While economic growth and monetary policy are positive in the UK, our valuation models suggest that the pound is still quite expensive.


EU €

We are negative on the euro given the ECB’s dovish stance and the negative carry.



Remain neutral as valuations look cheap whilst the cyclical backdrop has become less supportive.


Swiss franc ₣

The cyclical backdrop has become less supportive, however we wait for price action to be less stretched for a positive score.


The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.