Our multi-asset investment views - November 2021





While earnings surprises have not been as spectacular as in previous quarters, most companies confirmed that their earnings outlook remains positive.


Government bonds

The month of October has reinforced our conviction that a global tightening phase in liquidity (when the availability of funds becomes less ample) is well underway.



Vaccine distribution and increasing global growth 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.




US earnings have beaten the low bar that was implied by expectations in the last few weeks. Earnings remain the key driver of higher returns against elevated valuations and less accommodative stimulus.



Tilts to sectors such as energy and financials make the UK more interesting but we prefer to express these themes more directly.



Europe has been our preferred market over the medium-term. While the market has performed strongly this year, we have moderated our view that it can be the standout performer across regions.



Much of the positivity around the Japanese elections has passed through the market. The strength of the recovery is also hampered by manufacturers struggling to boost production due to bottlenecks.


Global Emerging Markets1

Fundamentals are still not attractive enough for us to change view. Vaccination rates remain low in many countries, suggesting uncertainty around the pace of their economic recoveries.

Asia ex-Japan



Valuations are starting to look attractive, and we expect looser monetary policy (central bank measures designed to stimulate the economy) in China next year.



EM Asia ex China

Supply chain issues have been a drag for Korea and Taiwan, particularly for the former.

Government bonds



We remain underweight US bonds believing tighter labour markets will continue to stoke concerns about rising inflation resulting in the Federal Reserve (Fed) raising rates at the end of 2022.



We have upgraded our view. Our expectation of central banks being slow to respond to inflationary pressures have been reinforced by the Bank of England’s (BoE) recent decision not to raise rates.



We have upgraded following “dovish” comments (monetary policymakers are often described as dovish when expressing intentions to use policy to maximise employment)  from the European Central Bank (ECB). The Pandemic Emergency Purchase Programme is to end as planned, but it looks increasingly likely that another support program could be introduced.



The Bank of Japan continues to manage the yield curve and is unlikely to move soon.


US inflation linked bonds

We remain neutral. A trade-off between higher oil prices and policy normalisation should keep inflation expectations around current levels.


Emerging markets local currency bonds

Concerns around higher inflation and weaker growth result in a downgrade. In a world of tightening developed market policies, emerging markets (EM) rates are unlikely to be well supported.


Investment grade credit



With low spreads and the increasing potential for rising interest rate volatility in 2022, we remain concerned investment grade (IG) bonds could be vulnerable to shifts in sentiment and market technicals.



Despite credit spreads remaining tight and valuations appearing stretched, we prefer EU IG to US IG. We don’t see the same drivers of supply in Europe, such as the increased level of M&A activity in the US. 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.


Emerging markets USD

From a valuation perspective, EM corporates continue to stand out as attractive despite jitters about contagion in the Chinese real estate sector becoming more widespread.


High yield bonds (non-investment grade)



We favour high yield debt over investment grade as we expect the latter to be more vulnerable to rising interest rate volatility.



We maintain our view as the sector continues to experience improved fundamentals, low default rates and has marginally wider credit spreads relative to US high yield bonds.





We continue to favour energy as it provides a good hedge against the risks that rising energy prices could pose to economic growth.



We remain neutral as the gold price is range-bound.


Industrial metals

The policy stance in China is more proactive amid weakening data whilst demand outside China continues to recover strongly as global activity normalises.



We remain neutral. Expected yields on US soybean and corn crops have rebounded for this harvest but a spike in fertilizer prices risks a supply shock for the next planting season.




US $

We remain positive as we recognise the value of the US dollar as a hedge against receding liquidity. As the cycle matures, it becomes more supportive of a long dollar position.


UK £

Although there is pressure from headline inflation, driven by high gas prices, sterling remains expensive, so we prefer to stay on the side-lines whilst we await further data.


EU €

We retain our negative view as we expect the ECB to remain dovish.



We have downgraded our view. Fundamentals, inflation risks and monetary policy present headwinds for the currency.


Swiss franc ₣

The economic backdrop has become less supportive. However, we are waiting for price changes to make valuations less stretched before we turn positive.


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

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