Our multi-asset investment views - December 2024
We remain positive on equities as they continue to be supported by strong earnings. Find out more about our views on a range of asset classes here.
Autheurs
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢Equities
We remain positive as equities continue to be supported by strong earnings. However, with valuations being stretched we recognise their vulnerability.
🟡🔼 Government bonds
We are neutral on duration as despite valuations flagging as cheap, the US economy is not yet faltering.
🟡Commodities
We remain neutral on broad commodities, where the muted outlook persists, and Chinese demand is subdued. We are positive on gold.
🟢Credit
We retain our positive view, driven by ongoing rate cutting from central banks leading to benign growth and strong liquidity. There are regional differences, however, with European credit being favoured over US credit.
Equities
🟢US
We maintain our positive view on US equities due to the robust US economy, strong consumer demand and a healthy labour market.
🟡UK
We remain neutral on the UK. Although valuations are attractive compared to some other markets, the recent budget has undermined business confidence, resulting in a weaker growth outlook.
🟡Europe ex UK
We remain neutral. Weak manufacturing data and a lack of support from China has resulted in a considerable amount of negativity being priced into European markets. However, the current environment of negative sentiment may result in tactical opportunities arising.
🟡Japan
We remain neutral. Economic growth is stagnant, and the country must deal with potential tariffs from the US. Additionally, the government's position is unstable, and the Bank of Japan (BoJ) persists with its efforts to normalise monetary policy.
🟡Global Emerging Markets1
We maintain a neutral outlook. The recent rally was driven by policy easing measures from the People’s Bank of China, which were underwhelming.
🟡Asia ex-Japan: China
We maintain a neutral position on Chinese equities due to expectations that Donald Trump will take a firm stance on China. Meanwhile, fiscal announcements have fallen short of expectations.
🟡EM Asia ex China
We maintain a neutral stance. While the region stands to benefit from China’s new stimulus measures, we prefer to gain exposure to China directly.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🟡 US
We remain neutral. Although yields are cheap, this is offset by the market reducing its expectations for rate cuts next year given the robust economic backdrop and inflation not falling further.
🟡 UK
We retain our neutral view. The environment suggests that UK bonds are lagging in the rate-cutting cycle and may soon benefit from central bank actions to normalise rates. However, this is balanced against an unfavourable supply/demand environment.
🟡 Europe
We maintain a neutral stance. Although European bonds should benefit from the ECB’s initiatives to normalise rates amid easing inflation and a moderating labour market environment, this is already largely reflected in the price.
🟡 Japan
We remain neutral for now but are cautiously optimistic that Japanese bonds might benefit as Japan's central bank continues to move towards a more neutral stance. Expectations of continued fiscal and monetary adjustments support this outlook.
🟡 US inflation-linked bonds
Our stance remains neutral. Despite upgrades in other sectors, inflation-linked bonds have seen less change due to varying expectations on inflation.
🟡 Emerging markets local currency bonds
We remain neutral on EM local bonds. Although valuations remain attractive, this is being challenged by a strengthening US dollar.
Investment grade credit
🔴 US
We remain negative. Valuations are expensive and despite improved market liquidity, US IG is vulnerable due to its long duration and sensitivity to rate changes.
🟡 Europe
We remain neutral. EU IG benefits from relatively more attractive valuations compared to the US and a financial environment that is perceived as less uncertain in terms of interest rate policy.
🟡Emerging markets USD
We remain neutral. We acknowledge that the sector offers more value compared to developed markets, but we continue to consider the potential effects of rising US yields.
High yield bonds (non-investment grade)
🟡US
We remain neutral as the emphasis remains on the vulnerability of US credit to rate-related uncertainties and inflation risks.
🟢Europe
We maintain a positive outlook on European HY as it is more attractive compared to the US due to the ECB's supportive stance and less uncertainty over policy compared to the US.
Commodities
🟡 Energy
We remain neutral. Although OPEC+ has postponed supply increases until 2026 to maintain balance, supply is set to exceed demand by 2025. Oil prices are stable, while natural gas prices have risen due to cold weather, indicating potential long-term supply imbalances.
🟢 Gold
We are positive on gold as it remains a preferred hedge against geopolitical and fiscal uncertainties, maintaining its appeal as a protective asset.
🟡Industrial metals
We remain neutral as although protectionist measures from China have led to higher prices for specific metals, the broader sector remains weak.
🟡Agriculture
The agriculture sector is well-supplied and successful soybean and corn harvests have resulted in record stock levels. With no significant weather events, supply risks are reduced, maintaining a stable outlook.
Currencies
🟢US $
We remain positive. This is due to the strong recent performance and tailwinds including tariffs, further divergence in monetary policy, and equity inflows to the US.
🟡🔼UK £
We have upgraded our view on the pound to neutral. This is largely based on the broader European context, where much of the bad news has already been priced in. Although there is no specific positive outlook, sentiment has shifted from negative to neutral.
🟡🔼 EU €
Our view on the euro has been upgraded to neutral from negative. This reflects our belief that the bad news in Europe has been mostly factored in, and we don’t expect the situation to worsen significantly in the near term.
🔴 CNH ¥
Our view on the renminbi remains negative. We expect both stimulus and currency depreciation will be necessary to negate the downtrend in growth and the impact of tariffs.
🟢🔼JPY ¥
We have upgraded our view to positive.
🟡🔼Swiss franc ₣
We have upgraded to neutral to align with the overall improved sentiment towards European currencies.
Source: Schroders, December 2024. 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.
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