Our multi-asset investment views - January 2021





We remain positive as ample liquidity (i.e. readily available funds) is supporting markets and vaccine developments are allowing investors to look ahead to economies re-opening.


Government bonds

We remain negative as although yields (the amount of return an investor will realise on a bond) have continued to normalise, valuations remain unattractive.



Commodity prices continue to slowly climb higher despite the new wave of lockdowns. We expect this to accelerate as the industrial recovery strengthens.



We remain neutral as although the probability of a recovery continues to boost both fundamentals and risk appetite, we see more growth potential in equities.




We remain positive and expect market gains to continue. However, we have a preference for other regional markets.



We upgraded UK equities as we expect it to benefit as the global recovery broadens into multinational and commodity-sensitive markets.



We remain positive on Europe as it should benefit from the economic recovery with the market dominated by value and ‘growth-sensitive’ sectors. The strong rebound in China should also be supportive.



There is evidence of a strong industrial recovery in Asia and the export-focused industrial components of the Japanese market should benefit.


Pacific ex-Japan

We continue to favour these markets given signs of a recovery in exports and ongoing support from the technology cycle.


Emerging markets

The strong rebound seen in Asia supports our positive view, while those regions exposed to the commodity sector should also perform well.


Government bonds



Yields (the amount of return an investor will realise on a bond) are likely to rise modestly as pent-up demand drives the global recovery and the US government continues to increase spending.



We remain negative as valuations are unattractive.



Germany remains our least favoured market, with valuations still expensive across all the metrics that we measure. 



We remain negative as the Bank of Japan will continue to keep government bonds in a tight range.


US inflation linked bonds

We remain positive as breakeven rates have improved and additional fiscal stimulus are expected following the US election result.


Emerging markets local currency bonds

We remain positive as opportunities still appear in emerging markets (EM), particularly Chinese government bonds. A few markets stand out on diversification grounds, for example South Korea and the Czech Republic.


Investment grade credit



The US election result and investors’ search for viable alternatives to expensive government bonds should be supportive.



We remain positive as improving fundamentals coupled with high existing cash positions provide potential room for further performance.


Emerging markets USD

We remain positive on the relatively strong fundamentals in EM corporates, while also seeing some potential value in EM high yield sovereigns.


High yield bonds (non-investment grade)



We remain negative as fundamentals are weak, with interest coverage remaining near record lows. However, the recent US election outcome should be supportive.



We prefer European HY over US due to lower forecast default rates and slightly better fundamentals.





Although the new wave of Covid-19 has weakened energy demand, the unexpected cut in supply from Saudi Arabia will help balance the market.



We remain neutral as we believe gold is vulnerable to rising real yields.


Industrial metals

Strong metal demand from China has shown signs of weakness, but ex-China demand is likely to pick up as economic activity normalises after the vaccine rollout.



We remain neutral as although Chinese demand remains strong, supply is being hampered by weather risks, and the recent price rises already reflects these factors.




US $

Although a negative view on the dollar is supported by the global recovery story, we are positive in a portfolio context in order to balance out risks elsewhere.


UK £

We have upgraded to neutral as US dollar weakness and a Brexit trade deal has seen sterling appreciate.


EU €

European growth indicators have followed the global trend while valuation continues to be cheap, despite recent appreciation.   



We remain neutral as the yen could strengthen in the short term due to US dollar weakness and growth outperformance, but weaken further out if investors switch to risker assets.


Swiss franc ₣

We remain neutral as the Swiss franc continues to perform well and the central bank remains active, despite the US describing it recently as a ‘currency manipulator’.


Source: Schroders, January 2021. The views for equities, government bonds and commodities are based on return relative to cash in local currency. The views for corporate bonds and high yield are based on credit spreads (i.e. duration-hedged). The views for currencies are relative to the US dollar, apart from the US dollar which is relative to a trade-weighted basket.

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.