Snapshot - Economics

Our multi-asset investment views - June 2019

What's changed in the monthly update of our views on a wide range of investment types?

1 July 2019

Multi-Asset Investments

Key

Asset classes

 
 

Equities

We hold a neutral view as economic risks continue to be elevated and trade tensions weigh on markets.

 

Government bonds

We maintain a positive view as bonds’ reputation as a relatively defensive asset has been reinforced during recent periods of market stress.

 

Commodities

We remain neutral on broad commodities, but we are positive on gold as it can be useful during market turbulence due to its perceived defensive characteristics.

 

Corporate Bonds

Valuations have become more attractive from a short-term perspective.

 

Equities

 
 

US

The momentum of the US stock market continues to be one of the strongest among the major markets.

 

Europe

The actions of the Federal Reserve in the US could result in a weaker US dollar and thus a stronger euro. This could hamper the recent improvement in European companies’ performance as their exports become less affordable.

 

UK

Increasing probability of a ”no-deal Brexit” and weakening investor sentiment present a strong headwind for UK equity market.

 

Japan

We continue to hold a neutral view as export weakness remains an area of concern.

 

Pacific ex-Japan

We remain neutral as export weakness in Singapore continues to be a drag.

 

Emerging markets

Valuations seem attractive with potential to increase although trade wars could pose a threat. Those emerging countries with a more domestic (rather than export) focus present the most interesting opportunities.

 

Government bonds

 
 
 

US

We upgraded US government bonds (Treasuries) because of the weak economic outlook paired with continuous trade war rhetoric between the US and China. Both of which are likely to increase demand for Treasuries.

 
 

UK

Upgraded UK government bonds (gilts) to positive, as investor demand for them may increase due to the rising probability of a no-deal Brexit. Investors tend to head for the perceived safety of government bonds at times of uncertainty.

 

Germany

We remain positive especially as we think the European Central Bank’s actions could support German government bonds.

 
 

Japan

Upgraded to positive as we think trade wars pose a threats to export demand and so investors may head for the relative security of bonds.

 

US inflation linked

We continue to be positive on US inflation.

 

Emerging markets local

Despite a more stable emerging markets outlook, we remain neutral as valuations have worsened which limits the upside potential.

 

Investment grade (IG) corporate bonds

 
 
 

US

Investment grade (IG) corporate bonds are bonds issued by companies. They are deemed “investment grade” by ratings agencies, which means they are seen as more secure than their non-investment grade equivalents. These bonds deemed more risky are called “high yield” bonds and are covered in the section below. We have upgraded US IG corporate bonds as we believe valuations have become more attractive.

 

Europe

We maintain a positive view as European economic fundamentals are strong and low interest rates provide additional support, because the higher rates available on corporate bonds means they remain in demand.

 

Emerging markets USD

Our view remains neutral as valuations are still unattractive.

 

High yield bonds

 
 

US

We remain neutral on US high yield bonds (discussed above) as valuations are still attractive, but longer term concerns remain.

 

Europe

We continue to hold a positive view as fundamentals are strong and valuations are appealing.

 

Commodities

 
 

Energy

We maintain a neutral outlook.

 

Gold

We maintain a positive view on gold based on potential for further growth disappointments, weakening US dollar and further loosening in monetary policy. All these factors can increase demand for gold.

 

Industrial metals

We keep industrial metals at neutral.

 

Agriculture

We maintain a negative stance on agriculture as global stock levels look set to remain elevated.

 

Currencies

 
 
 

US dollar

We upgraded the US dollar to positive as its status as it may be used as a hedge against global growth weakness.

 
 

UK sterling

We have downgraded sterling to negative due to reduced probability of a Brexit deal and weak economic data.

 

Euro €

Facing mixed medium-term and long-term drivers, we kept EUR as neutral.

 
 

Japanese yen ¥

Global growth weakness is likely to continue and so we have upgraded the yen as it could provide a safe haven in this environment.

 

Swiss franc ₣

We maintain a neutral view, as the weakness of European industry is spreading to Switzerland.

 

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.