Global CIO Michael Strobaek: "Equity markets can continue their uptrend."
After a poor end to 2018 the first quarter has seen markets react well to central banks holding interest rates firm, whilst recession fears look premature. We look at the latest outlook for investors.
The rally in financial markets in the first three months of the year continued over the last few weeks on the back of dovish major central banks and signs of pick-up in economic activity in Asia, including China. In our view this bodes well for the global economy, despite concerns over the recent inversion of the yield curve which is often used as a bellwether for the economy. However, we don’t believe this to be a sign of an imminent recession. In fact, we think the likelihood of a recession in the USA over the next twelve months is less than 10%.
Equities still have legs
The environment for investors should remain benign into the second half of the year. We have returned to a positive tactical view on equities as an asset class and have adopted a positive stance on the US equity market, which is strongly tilted toward technology, a sector we continue to favor.
Growth may put pressure on government bonds
In fixed income, we neutralized our positive stance on government bonds following the rally this year, as growth may well put upside pressure on yields. We remain neutral overall on alternative investments, but we see more potential for sterling, which we believe is still undervalued, as well as selected emerging market currencies.