Global CIO video: "We will get some stabilization of growth."
After taking the fast lane to start the year, financial markets have shifted down a gear in recent weeks. Nevertheless, investors have little to complain about. We take stock of where we stand.
Cautious optimism about US-China trade talks and the Brexit process, as well as dovish central banks, are helping equity and bond markets hum along. Our view is that the global economy, especially the weak parts – China and the Eurozone – should actually stabilize, although politics is likely to continue to be a topic for investors in the months ahead.
The global economy seems to be picking up slightly following the industrial production slump, with Chinese data providing the first signs of recovery. We continue to expect growth to improve in the months ahead and central banks to stay on hold for the time being.
Despite the good year to date, we are far from complacent, as setbacks on the political front cannot be ruled out and valuations of risk assets are no longer cheap. We thus consider it prudent to remain neutral on the major asset classes, including equities.
We maintain our profitable views on emerging market (EM) equities and currencies, as we expect EM to once again widen their growth advantage versus developed markets. Yet, we have taken profit on EM bonds as spreads have narrowed substantially.