Global CIO video: "Equities are the place to be invested in."
Over the past month, some major equity indices have hit record highs, spurred by several factors including another rate cut by the US Federal Reserve, hopes for a US-China trade deal and signs of stabilization in global industrial production. In the latest Global CIO video, we look at the latest developments and our current views.
So is now the time to reduce exposure to equities? We think not and stay overweight equities in our portfolios. The recovery of industrial production, which we expect going into 2020, is not yet fully discounted in markets and the signing of even a limited trade deal between the USA and China would unlock further potential in this asset class, in our view. While our positions might be subject to some near-term reversal after their strong run, we expect them to continue to perform over our tactical 3-6 month horizon.
Raising exposure to emerging markets
Within equities, we note that the risk/return profile of emerging market equities has improved, which is why we have raised our exposure to this segment. Within developed markets, the US market remains preferred, and we continue to favor the IT and financial sectors.
A note of caution
Separately, we remain cautious on government and investment grade bonds, as yields are still too low and we expect returns to disappoint relative to other asset classes. Indeed, better economic data contributed to the recent increase in core bond yields.