Our multi-asset investment views - August 2024
We maintain our positive view on equities as the fundamental backdrop remains resilient and supportive. Find out more about our views on a range of asset classes here.
Authors
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢Equities
We maintain a positive outlook on equities as the fundamental backdrop remains resilient and supportive. Following recent corrections caused by poor nonfarm payrolls data, technical factors suggest oversold conditions.
🔴🔽 Government bonds
We have downgraded our view to negative. Relative to our soft-landing base case valuations look expensive, and we believe yields may move higher in the short term.
🟡Commodities
While broad commodities have sold off significantly given growth concerns, we maintain our neutral score as supply remains resilient while the demand outlook from China continues to look poor.
🟡Credit
We stay neutral overall. Moderate growth, easing financial conditions and improved valuations are supportive, but potential macro weakness leaves us on the side lines.
Equities
🟢US
We retain our positive view, which is consistent with our view of a soft landing. The expansion of US reserves and expectations for positive earnings growth should lead to favourable financial conditions.
🟢🔼UK
Within Europe we maintain our preference for the UK. The recent election should lead to a period of stability and improved sentiment. We believe that this should allow prices to return to historic norms.
🔴Europe
Our view is unchanged. Equity market performance remains narrow, the earnings outlook in Continental Europe is deteriorating and the fundamental backdrop remains a concern.
🟡Japan
Given the recent correction, we believe there is the potential for the market to rally. However, we stay neutral as the risk/return profile is less appealing.
🟢 Global Emerging Markets1
We remain positive as many emerging economies have brought inflation under control, are running prudent fiscal policies, and should benefit from the manufacturing recovery that is currently under way.
🟡 Asia ex-Japan: China
We maintain our neutral score as the domestic economy remains sluggish, weighed down by the property sector.
🟢EM Asia ex China
Cyclical markets such as Taiwan and South Korea should continue to benefit from the manufacturing recovery.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴 US
Relative to our soft-landing base case, valuations look extremely expensive. We expect bonds to underperform after the recent rally.
🟡 UK
We maintain a neutral score. Although inflation is falling and the Bank of England cut interest rates in August, we prefer to stay on the sidelines.
🟡 Germany
We remain neutral. Markets have priced in three interest rate cuts by the end of the year. Persistently weak manufacturing data supports the case for more rate cuts by the European Central Bank.
🟡 Japan
We remain neutral as although yields look attractive, the market is pricing in two rate hikes by the end of the year as headline inflation is increasing.
🟡🔽 US inflation linked bonds
We have downgraded our view to neutral. Signs of a hard recession are low and the labour market has stabilised.
🟡 Emerging markets local currency bonds
We remain neutral as although valuations appear attractive, wider spreads (the difference in the yield on two different bonds or two classes of bonds) are concentrated among a few distressed issuers.
Investment grade credit
🟡 US
We remain neutral as although valuations have improved, they are not yet compelling.
🟡 Europe
Although valuations look attractive we remain neutral due to the mixed macro data.
🟡Emerging markets USD
Valuations remain expensive, so we remain neutral.
High yield bonds (non-investment grade)
🟡US
We stay neutral. Although valuations have improved they are not yet sufficiently attractive, and fundamentals have continued to weaken slightly.
🟡Europe
Valuations look attractive in Europe, and financial conditions are easing. However, the potential for macro weakness leaves us neutral.
Commodities
🟡 Energy
We maintain our neutral score. Price sensitive purchases from China and OPEC’s reaction to price moves should mean that the current range holds, while the rest of the market remains balanced.
🟢 Gold
We expect yields to fall as we enter the interest rate cutting cycle.
🟡Industrial metals
Although policy is supportive in China this is not being reflected in the demand for metals, while supplies remain robust.
🟡Agriculture
We maintain our neutral score. The latest data has revealed a bumper harvest across several key grains, alongside promising crop conditions in the US, leading to strong supply.
Currencies
🟢🔼US $
We tactically upgrade our view on the dollar as it will benefit if interest rates rise, consistent with our view of a soft-landing.
🟡🔽UK £
We have downgraded sterling to neutral. While the pound should benefit from political stability and improved sentiment, recent volatility leaves us on the side-lines.
🔴 EU €
We maintain our negative view as the macro outlook is weak.
🟡 CNH ¥
We remain neutral. Growth remains weak and the recent appreciation can be explained by the interest rate differential versus the US.
🟡 JPY ¥
Although the recent large moves leave valuations cheap, we prefer not to chase the current trend and stay neutral.
🔴Swiss franc ₣
We maintain our negative score as the SNB’s recent rate cuts aims to prevent franc strength.
Source: Schroders, August 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.
Subscreva o nosso conteúdo
Visite o nosso centro de preferências e escolha que informação deseja receber por parte da Schroders.
Authors
Topics