Our multi-asset investment views - August 2021





We remain positive, but maintain a more neutral stance between economically sensitive/lowly valued areas of the market versus growth areas, alongside a bias to quality.


Government bonds

After the recent rally valuations look expensive. The strength of economic momentum has diminished and peak liquidity (when the availability of funds is at its most ample) may already be behind us.



We remain positive, with the market positioned for an economic recovery fuelled by central bank stimulus. Commodities tend to perform well in the “expansion” phase of the economic cycle.



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




Although Q2 earnings have been strong, we are only seeing minor upgrades to expectations, setting a low bar for continued surprises.



We have downgraded our view in line with our moderation of bias towards economically sensitive areas of the market. The positive vaccination situation has encouraged the pound to rise, weighing on the market.



Vaccination rates continue to surprise to the upside and we are confident that Europe will avoid winter lockdowns.



The impact of the resurgent virus is weighing on an economically sensitive market with the likelihood of tighter lockdowns restricting mobility.


Pacific ex-Japan

We continue to favour Korea and Taiwan as their manufacturing outlook remains bright, with low semiconductor inventories and an environment of high global demand.


Emerging markets

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


Government bonds



If, as we expect, the Federal Reserve (Fed) starts to taper in Q4, it should provide a catalyst for higher yields (lower prices). We have therefore downgraded our view.



Gilt yields remain close to their historic lows despite the economy rebounding as the reopening continues. Additionally the Bank of England continues to taper its quantitative easing (QE) program.



We remain negative on German Bunds because of the likely divergence in monetary policy between a dovish European Central Bank (ECB) and a “hawkish” Fed (policymakers are often described as hawkish when expressing concerns about limiting inflation).



The Bank of Japan continues to manage the yield curve. Newly announced Covid-19 restrictions will likely weigh on activity in Q3.


US inflation linked bonds

Flows increased recently on the view that recent rises in inflation will be transitory. However, the hawkish comments from Fed monetary policymakers on tapering indicate inflation expectations are priced in.


Emerging markets local currency bonds

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


Investment grade credit



Comments from the latest Fed meeting are likely to increase volatility and market uncertainty. Valuations are also at extremely high levels, creating upside risk to returns. 



Despite stronger technicals underpinned by ECB action, credit spreads remain tight and therefore valuations appear increasingly stretched.


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)



Although the increasing incidence of rising stars (HY credit upgraded to IG credit) means spreads could tighten further, we remain negative. This is because the impact is likely to fade as the market outlook for interest rates and liquidity is set to reverse.



Improved fundamentals and low default rates are offset by deteriorating valuations and the lack of a coordinated fiscal recovery programme (fiscal programmes, like monetary policy, are means by which policymakers attempt to manage economic fluctuations).





The global energy market remains in deficit and inventories continue to be depleted. With demand expected to continue to increase, we remain positive.



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


Industrial metals

Demand outside China is picking up strongly amid the global recovery. This offsets the moderation in Chinese demand reflected in domestic data.



We have downgraded our view as we expect bullish supply factors will begin to fade following recent solid gains in the sector.




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, the pound is expensive with valuations at a three-year high.


EU €

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



We have upgraded the yen to neutral as valuations look cheap and the economic backdrop becomes less supportive.


Swiss franc ₣

Upgraded to neutral as the economic backdrop becomes less supportive, however we wait for price action to be less stretched for a positive score.


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