Nannette Hechler: "Rising yields reflect positive environment"
Each month seems to bring with it a new focal point for financial markets. As worries over trade conflicts moved to the background, rising bond yields reemerged as a concern for investors.
We believe that global yields have further to go since the global economy should reaccelerate in the coming months while the US Federal Reserve tightens policy.
Growth Reacceleration Good for Commodities
In our investment strategy, we focus on the still robust fundamentals, though we do keep a close eye on geopolitical developments such as the recent US withdrawal from the nuclear accord with Iran.
In terms of asset classes, we are neutral on credit and negative on government bonds. We suggest a short duration strategy on government bonds given the risk of further yield increases. Meanwhile, the expected growth reacceleration should provide a tailwind for commodities, which is why we moved back to a positive stance. Within the asset class, we continue to favor industrial metals.
Positive on Equities, Negative on Dollar
We remain optimistic on equities, which should benefit from the growth pickup while withstanding tighter monetary conditions. The UK equity market should do well given its bias to two of the sectors we favor, energy and financials. In currencies, we retain our negative view of the USD since we expect positive economic surprises in the Eurozone to outpace those in the US after a period of weakness.
Investing Long-Term in Millennials
Taking a long-term view, we highlight our Supertrend "Millennials' Values." True digital natives, millennials remain a key driver of ever greater digitalization, a trend we believe still offers significant potential.