Michael Strobaek: "Equities do well in an economic recovery"
Global equities have risen to new heights. But, is this rally set to continue?
Another month of strong growth momentum has taken global equities to new heights. A weaker-than-expected election result for German Chancellor Merkel and the contentious Catalan independence referendum raised the risk premium only temporarily and locally. Tensions over North Korea have receded, at least for now, and hopes for US tax reform provided an added boost. Q4 is usually a positive one for equity markets, but we caution that a great deal of optimism seems priced in.
This is why we maintained our constructive view on global equities with a continued preference for the Japanese, Eurozone, Swiss and Australian equity markets. Within our overall neutral stance on fixed income, we see the rise in US yields as an opportunity to raise duration relative to other bond markets. In Switzerland, we see a risk of yields backing up further and thus shorten our duration. Commodities have been benefiting from the robust growth backdrop, with energy rallying in Q3. However, we believe that the market's rebalancing is set to pause and see limited upside going forward. As a result, we have taken some profits on commodities and energy.
Watch the Global CIO video featured by Michael Strobaek, Global Chief Investment Officer: