Our multi-asset investment views - February 2025
We retain a positive view on equities as, despite global uncertainties, they remain resilient. 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 on equities as, despite significant uncertainty, equities have shown resilience and resumed an uptrend.
🟡 Government bonds
We remain neutral on government bonds. Although signs of disinflation offer some support, trade tensions and inflation risks create uncertainty.
🟡 Commodities
Despite a small rally driven by agriculture and precious metals, we remain neutral overall.
🟢 Corporate bonds (credit)
We retain our positive view on credit with a continued focus on European high yield. Despite recent volatility, credit spreads have shown resilience, particularly in Europe.
Equities
🟢 US
We maintain a positive view on US equities, supported by robust economic growth and strong earnings momentum, despite heightened political uncertainties.
🟡 UK
We remain neutral on UK equities as the economic environment is unclear. Recent forecasts from the Bank of England (BoE) signal potential weaknesses in growth and sticky inflation, suggesting a cautious approach to monetary policy going forward.
🟢 Europe ex UK
We retain our positive view. Although the political landscape in Europe is turbulent, much of it is already reflected in current market prices. Additionally, the market’s resilience, despite the risk of potential tariffs, suggests there is room for upside surprise.
🟡 Japan
We maintain a neutral stance on Japanese equities, acknowledging the global uncertainties and lack of strong domestic catalysts to significantly drive the market.
🟡 Global Emerging Markets1
We remain neutral on emerging market equities due to ongoing geopolitical risks and the lack of clarity over future global trade policies.
🟡 Asia ex-Japan: China
We maintain our neutral view. While Chinese structural reforms and supportive policy measures provide a foundation for potential growth and stability, uncertainties persist due to ongoing trade tensions with the US.
🟡 EM Asia ex China
We remain cautious. Elevated inventory levels in markets such as Taiwan suggest a potential downturn, as rising inventories often presage stock market declines. This uncertainty is compounded by the potential negative impacts of US trade tariffs.
1 Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🟡 US
We remain neutral. Although valuations have become moderately attractive, robust growth and inflation risks highlight why the Federal Reserve (Fed) has indicated it is unlikely to signal further cuts, at least in the short term.
🟡 UK
Our continued neutral view stems from ongoing inflationary pressures and stagflation fears. The BoE's recent forecasts show it now expects lower growth and higher inflation in 2025, indicating a more cautious approach to rate cuts is likely.
🟡 Europe
We maintain a neutral stance. While we anticipate short-term disinflation, ongoing concerns about trade and geopolitical influences may hinder significant bond market moves.
🟡 Japan
We remain neutral on Japanese government bonds. While minimal exposure to tariff risks provides some stability amidst global uncertainties, we see limited immediate drivers for significant bond market moves.
🟡 US inflation-linked bonds
Our stance remains neutral. Since the primary benefit of inflation-linked bonds is to provide a hedge against rising inflation, mixed signals in inflation expectations keep us cautious.
🟡 Emerging markets local currency bonds
We remain neutral. EM local rates are looking attractive from a valuation standpoint, with real yields (the return a bond investor earns from interest payments after accounting for inflation) at historically high levels in several EM countries. However, risks lie in the strength of the US dollar and the potential impacts of a global trade war.
Investment grade credit
🔴 US
We remain negative as although valuations remain tight and reflect the high demand, recent signs of flattening demand and considerations around inflation pose some risks.
🟡 Europe
We remain neutral on investment grade credit. Valuations in European investment grade are more attractive compared to the US, and interest rate cuts continue to benefit the floating rate nature of the European economy.
🟡 Emerging markets USD
Our view remains neutral. Although we see more value in this sector compared with developed markets, we remain attentive to the possible effects of increasing US yields.
High yield bonds (non-investment grade)
🟡 US
We remain neutral. Fundamentals such as stable leverage (where debt levels are manageable relative to earnings) and manageable refinancing costs have provided support to the market. However, flat demand and tight valuations limit upside potential.
🟢 Europe
We remain positive on European high yield as valuations remain attractive. European growth expectations are low but positive, the European Central Bank (ECB) remains supportive, and inflation is sticky but currently well-behaved.
Commodities
🔴Energy
We remain negative on energy as forecasts for 2025 supply and demand growth predict the market will generate a significant surplus, with OPEC+ still on track to re-deploy supply in the second quarter.
🟢 Gold
We retain our positive score as the recent rally in real yields has significantly boosted gold prices year-to-date. Nonetheless, the trend of central bank gold purchasing remains strong, and gold is still under-owned by investors. This implies that fear of missing out could further drive demand.
🟡 Industrial metals
We remain neutral as although there has been an increase in the global demand outlook, the overall narrative for metals remains dominated by weaker demand growth in China.
🟡 Agriculture
We remain neutral on agriculture. Grain prices have risen recently due to worsening conditions in South America. However, the broader outlook remains one of strong supply dynamics, falling input costs, and the potential for tariff retaliation to lower prices.
Currencies
🟢 US $
At least in the short term, the US dollar should be the clear winner amid trade tensions. With the persistent risk of a hardline stance on tariffs and a quiet January that saw favourable technical conditions, we maintain our positive outlook.
🟡 UK £
We hold a neutral view on the pound. While the UK has temporarily avoided tariff risks, the overall outlook remains fragile. Additionally, there is a risk that services inflation may not continue its recent decline due to persistent wage pressures.
🔴🔽EU €
We have downgraded to a negative outlook as we see the euro as vulnerable to US trade policies, especially tariffs.
🔴 CNH ¥
Our view on the renminbi remains negative, viewing it as a primary target in ongoing trade tensions between the US and China. We expect there may be further impact from retaliatory tariffs and anticipate a weaker currency going forward.
🟡 JPY ¥
Our view on the yen remains neutral. Given its immunity from tariff threats so far, we recognise it has potential to serve as a safe haven amid market volatility and tariff uncertainties.
🟡Swiss franc ₣
We maintain a neutral stance on the Swiss franc. Despite the risk of depreciation, the currency's reputation as a safe haven should provide underlying support.
Source: Schroders, February 2025. 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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