Our multi-asset views for November 2018

Multi-Asset Investments

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Asset classes



Our models suggest valuations are turning more reasonable after recent corrections. However, this improvement has come with worsening momentum signals, which are approaching negative territory.


Government bonds

We remain negative on duration. Despite the improvement in valuation given the rise in yields, inflationary pressures continue to rise.



Top-down conditions remain supportive, but carry and momentum have deteriorated. Industrial metals and agriculture held up better than energy and gold is starting to show safe-haven characteristics.



October saw spreads widening across sectors in all regions, accelerating weakness in credit that we have seen year to date.





With no surprises in the US mid-terms results, we expect investors to soon shift their attention towards fundamentals, including earnings, and also the Federal Reserve.



Although valuations appear to be reasonable, momentum and cyclical indicators are still neutral.



We are still neutral on UK equities, as the market continues to be driven by political turmoil and Brexit noise.



We retain a positive view. Attractive Japanese valuations, improving return on equity and increasing capital expenditure are compelling reasons for optimism.


Pacific ex-Japan

Ongoing trade war developments, together with local country-specific risk factors, pose a threat to profits, but we keep a neutral stance.


Emerging markets

Valuations are attractive, especially following the significant sell-off so far this year. Investors may find the strong EM earnings story attractive in coming months.


Government bonds



The recent rise in yields has taken valuation to fair levels, but cyclical headwinds (wage/price inflation) may lead to further rise in yields.



The market discounts two rate hikes, but the BoE has made it clear that if a Brexit deal is resolved then those hikes would likely occur earlier than currently expected.



With ongoing Italian budget negotiations and the European Central Bank highlighting no rise in rates before Summer 2019, investors will likely continue to own Bunds.



Despite the encouraging economic expansion, inflation remains weak. We remain neutral as monetary policy is likely to stay firm.


US inflation linked

We remain positive on US inflation. We expect price pressures to remain high even as growth slows given the lags to wages and inflation.


Emerging markets local

We maintain a neutral view as cyclical headwinds prevent us from taking advantage of the improvement in local market valuations.


Investment grade (IG) corporate bonds


US IG corporate bonds

Fundamentals for bond holders are continuing to weaken as shareholder-friendly behaviour becomes more prevalent.


European IG corporate bonds

While fundamentals remain robust, we believe the path of the European credit markets will be dictated by developments in Italy, Brexit, and changing leadership at the European Central Bank.


Emerging markets USD

We believe that the regional mix and fundamental path of earnings marginally favours high quality emerging market corporate bonds over their high yield counterparts.


High yield bonds



We expect the supply/demand situation in US high yield to deteriorate and maintain our view that it is overpriced and vulnerable.



The European market is due a period of readjustment from what remain extraordinarily low levels of yield as conditions start to normalise.





Move to neutral. Supply and demand look more balanced after the US administration allowed continued buying of Iranian oil, while evidence for demand looks mixed.



Remove the negative bias in Gold as it starts to show safe-haven characteristics in the latest period of market correction.


Industrial metals

Fundamentals still positive overall. Very bearish sentiment means potential inventory re-stocking from current low levels, or trade war de-escalation, could provide support.



We remain positive, with scope for further recovery from over-sold levels.




US dollar

Even though US growth today shows signs of slowing, we believe that the failure of global growth to recover and higher US rates will ultimately push the dollar higher.


UK sterling

We continue to believe that the majority of Brexit fears have been priced into GBP, and see the currency as one of the few to benefit from rate hikes in 2019/2020.


Euro €

EUR weakness is likely to continue on a continued moderation of growth and inflation into next year, whilst issues of Italian and German political issues are likely to linger.


Japanese yen ¥

We expect yen strength in the coming months as global growth continues to slow, US yields to stop dragging on the US/Japan rate differential and very attractive valuation.


Swiss franc ₣

CHF is likely to stay on par with USD as a safe haven for European investors, whilst there has been little vocal opposition from the Swiss National Bank so far due to stable export growth.