Global CIO video: "Investors should hold on to equities"
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Global CIO video: "Investors should hold on to equities"

Global equity markets have continued to prove resilient in recent weeks, lingering not far from record highs.

Equity markets' resilience is rather remarkable as economic indicators have, in fact, weakened as a result of ongoing supply chain bottlenecks and uncertainty around COVID-19, with a growing number of new infections impacting services sector activity.

Watch the new House View video with James Sweeney, Chief Economist and Regional CIO Americas

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Yet despite these headwinds, several factors, not least very easy financial conditions, are still pulling the economy forward. Although major central banks have announced or may announce some limited reduction of asset purchases, we expect them to keep liquidity abundant.

Within the Investment Committee, we acknowledge the recent weak patch, but believe that favorable economic conditions should prevail, with global industrial production expected to strengthen well into next year.

In light of this, we continue to believe that equities offer attractive return potential over the next three to six months, which is why we remain invested in line with benchmark allocations. Within equity markets, we retain a moderately cyclical tilt thanks to overweight positions in Germany, Spain and the UK. We also have a favorable view on the Japanese equity market. We consider these markets attractively valued, with strong earnings dynamics, and expect them to benefit from a strengthening in industrial production.

Our cyclical tilt is further underscored by our continued underweight in government bonds, which in our view are still unattractive as we see yields rising again.