Michael Strobaek: "Correction is a buying opportunity"
After the February sell-off, financial markets have stabilized somewhat. Economic data shows declining growth momentum. However, growth remains strong enough to support further gains in equity markets, in our view.
Inflation concerns accelerated volatility in February. More recently, protectionism came to the fore after the US administration announced tariffs on steel and aluminum, triggering market jitters again. Although we consider a fully-fledged trade war unlikely, continued heated rhetoric could lead to bouts of risk aversion.
Nevertheless, it is worth keeping in mind that growth remains robust – the slight growth moderation we have seen recently should in our view be shallow and brief. In parallel, inflation is set to rise only gradually, and we do not think that it poses a material short term risk for markets.
Positive on Equities, Neutral on Fixed Income
We remain positive on equities and retain a sector positioning that we believe can withstand trade-related uncertainty. We did move to a positive view on the JPY against the USD, adding an element of risk mitigation. Within our neutral view on fixed income, we closed our positive view on the now unattractively priced investment grade credits, also reducing overall risk.