Our multi-asset investment views - May 2024
We have upgraded our view on UK equities to positive on expectations of higher earnings and cheap current valuations. Find out more about our views on a range of asset classes here.
Profily autorov
🟢 Long / positive
🟡 Neutral
🔴 Short / negative
🔼 Up from last month
🔽 Down from last month
Main Asset Classes
🟢Equities
We have maintained our positive view on equities. This is supported by expectations of strong earnings growth and a favourable liquidity environment.
🟡 🔼Government bonds
We are selectively overweight in areas where we see valuations as more attractive but are maintaining a neutral stance overall.
🟡🔽Commodities
A continued uptick in manufacturing provides a supportive backdrop for base metals. We have moderated our view given how far markets have moved.
🟡Credit
Valuations remain rich, especially in US IG, where economic activity does not justify current spreads. Corporate fundamentals have also deteriorated.
Equities
🟢US
We remain positive on US equities as the growth environment has stayed favourable.
🟢🔼UK
We have upgraded our view on UK equities to positive. We have seen earnings expectations trend upwards while valuations also remain cheap.
🟢Europe
We maintain our positive outlook as the rebound in the European economy should act as a significant driver.
🟢Japan
Our outlook remains positive due to robust fundamentals and a favourable macro environment.
🟡 Global Emerging Markets1
Considering the fragility of the Chinese economy, specifically the challenges faced by its property sector, we remain neutral as China exerts a significant influence on the EM universe.
🟡 Asia ex-Japan: China
With no sign of the People’s Bank of China providing any meaningful stimulus to the economy, we retain our neutral view.
🟡🔽EM Asia ex China
We remain neutral given the potential negative repercussions of delayed US rate cuts.
1Global Emerging Markets includes Central and Eastern Europe, Latin America, and Asia.
Government bonds
🔴 US
We remain negative towards the US given the risk of inflation remaining higher for longer and medium-term concerns about fiscal credibility.
🟢 UK
We see a valuation opportunity in gilts, which appear to have been unduly caught up in the sell-off in US Treasuries. UK inflation should soften and help support the case for interest rate cuts.
🟡 Germany
We see further evidence of inflation softening in Europe. Markets also reflect an expectation of rate cuts, with the European Central Bank (ECB) indicating that these are likely from June.
🟡 Japan
We remain neutral as although we have seen cash rates turn positive in Japan this year, this has not had a material impact on bond pricing.
🟢 US inflation linked bonds
US inflation-linked bonds continue to offer a useful hedge (a strategy to reduce the risk of a loss in an existing position) in a scenario where inflation has remained higher for longer than expected.
🟡 Emerging markets local currency bonds
A soft-landing environment would be positive for EM rates. However, concerns surrounding US inflation and its impact on the Federal Reserve’s (Fed) policy keeps us on the sidelines.
Investment grade credit
🟡 US
Valuations remain expensive and we believe US economic activity does not justify current spreads (the difference in yield between a treasury and corporate bond of the same maturity). Strong growth and an abundance in liquidity (the ease with which a bond can be converted into cash without affecting the market price) stops us from turning negative.
🟡 Europe
We remain neutral as defaults are rising in Europe, highlighting the challenge of large levels of debt in the face of higher rates. However, with growth rebounding, we expect strong earnings to remain supportive.
🟡Emerging markets USD
We remain neutral as although fundamentals are strong, valuations remain expensive.
High yield bonds (non-investment grade)
🟡US
We remain neutral as valuations have been buoyed by liquidity in the face of deteriorating fundamentals.
🟢 Europe
We are positive as European HY offers better value than the US. We also expect the European Central Bank (ECB) would move to support the economy if growth weakened and inflation fell.
Commodities
🟡 Energy
Energy markets remain reasonably balanced. Geopolitical risk has been priced out and inventories are trending in line with historical norms.
🟢 Gold
We remain positive as demand in the physical market remains strong.
🟢 🔼 Industrial metals
Markets have moved quickly as the scenario of a demand-driven uptick becomes consensus. We remain positive but cautious given the technical backdrop.
🟡Agriculture
We remain neutral due to uncertainty in individual markets.
Currencies
🟢US $
Interest rate differentials continue to drive the dollar. Higher-for-longer inflation in the US should benefit the currency should other central banks start to cut rates first.
🟡UK £
We remain neutral as although a global soft-landing scenario would benefit sterling, concerns around stagflation remain.
🟡 EU €
Though the economic cycle is looking more favourable in Europe, widening interest rate differentials keep us neutral.
🟡 CNH ¥
We remain neutral, reflecting the balance between weak economic growth and the impact of the uptick in the global goods cycle.
🟡 🔽 JPY ¥
We have moderated our view on the yen. The Bank of Japan’s recent intervention in support of the currency has had limited impact and we see little threat to its continued weakness.
🔴Swiss franc ₣
The Swiss Central Bank was one of the first major central banks to cut rates. The subsequent increase in interest rate differentials leaves us negative.
Source: Schroders, May 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.
Profily autorov
Témy