Monthly viewpoint

Current views - November 2019

Our investment team assesses the prospects for a range of asset classes and currencies

02/12/2019

Investment Team

Key

Asset classes

 
 
 

Equities

Valuations are above long-term averages but central banks’ actions continue to be supportive.

 
 

Bonds

Valuations are expensive with negative bond yields prevalent in Europe. We prefer USD bonds to EUR and GBP bonds. We prefer corporate bonds to government bonds.

 
 

Alternatives

Attractive diversification characteristics compared to equities and bonds. We favour gold as global central banks ease policy. We remain cautious on UK commercial property.

 
 

Cash

Cash has defensive and opportunistic qualities in uncertain and volatile markets.

 

Equities

 
 
 

UK

Brexit uncertainty continues to weigh on market sentiment. Preference for value and small/mid-sized companies.

 
 

European

Weaker economic data and the uncertainty around trade tensions continue to be a headwind, offset by bolder easing measures by the European Central Bank.

 
 

North American

Economic fundamentals are relatively attractive vs. rest of the world and earnings growth expectations have moderated.

 
 

Japanese

Cheap valuations offset by weak domestic demand post-consumption tax hike.

 
 

Asia and Emerging markets

Valuations and fundamentals look attractive relative to developed markets. Slowing Chinese growth and trade tensions remains a headwind, but Chinese stimulus should be supportive.

 

 

Bonds

 
 
 

Government bonds

Valuations are expensive with negative bond yields prevalent in Europe. We prefer USD bonds to EUR and GBP bonds. We prefer corporate bonds to government bonds.

 
 

Investment grade

Returns are likely to be driven largely by government bond markets. While corporate spreads are close to post 2009 averages, we are mindful of increasing company leverage and the late stage of the economic cycle.

 
 

High-yield

The higher starting yield may see European high-yield outperform investment grade.

 
 

Inflation-linked

We prefer US TIPS to conventional treasuries. Sterling linkers also look cheap relative to nominal bonds.

 
 

Emerging markets

Emerging market bonds generally offer good value.

 

Alternatives

 
 
 

Absolute return

We like the diversification characteristics of trend following and market-neutral strategies.

 
 

Commercial property (UK)

Ongoing concern for the UK commercial property environment, but income characteristics remain attractive.

 
 

Commodities

Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.

 
 

Structured products

Offer attractive returns but we acknowledge the shorter-term correlation with equities.

 

Cash

 
 
 

Cash

Cash has defensive and opportunistic qualities in uncertain and volatile markets.

Author

Investment Team

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The information in this market outlook is derived from sources which we consider to be reliable. However, it may not in all cases be verified independently and we do not attest to its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Forecasts may be the consensus of extremely divergent possibilities and the full range of potential outcomes should be appreciated. No representation or warranty is made that any value (or proximity to) any value, return or forecast will be achieved. The opinions expressed are those of employees of Schroder & Co. (Asia) Limited, and reflect their judgement at this date and are subject to change. Reliance should not be placed on the views and information in this market outlook when taking individual investment and/or strategic decisions. 

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