Current views at a glance - September 2017
07/09/2017
Key
Equities
UK
Concerns over ongoing economic strength in light of Brexit overhang and views that the tailwind from weaker sterling may be in the past.
European
Better economic activity with an undervalued currency and equity market.
North American
Slightly negative due to fuller valuation alongside concerns over Trump's delivery on pre-election promises.
Japanese
Better global economy is helping but the domestic economy is still disappointing.
Asia Pacific
Dollar headwinds are fading and the pick up in global trade is helpful to Asia Pacific.
Emerging markets
Modest but synchronised global growth should be more supportive to Emerging Markets.
Fixed income
Government bonds
We remain negative on GBP and euro bonds but US Treasuries are becoming more attractive given the normalisation of yields that has taken place.
Investment grade
Credit spreads provide some pick-up but we prefer short-dated bonds.
High yield
Credit spreads are at a historically tight level so we would be wary of high-yield spread duration exposure.
Inflation-linked
Recent gains in inflation-linked government bonds reduce their valuation attractiveness but they are still desirable from an improving economic perspective.
Emerging market
Selectively, local emerging market bonds offer good interest rate and currency exposure.
Alternatives
Absolute: equity
Increased volatility and dispersion should provide opportunities.
Absolute: fixed income
Lower liquidity and flatter rate profiles reduce the attractiveness of many strategies.
Absolute: macro
Increased volatility across many asset classes should counter flatter rate cycles.
Commercial
Post-Brexit concerns have resulted in the marking down of property, but income characteristics are still attractive.
Precious metals
Gold is attractive as a diversifier, portfolio insurance and as an inflation hedge.
Industrial metals
Ongoing excess supply is likely to weigh on prices for some time.
Energy
Oil continues to be volatile as politics and supply concerns dominate the market.
Cash
Cash
Cash has defensive and opportunistic qualities in uncertain and volatile markets.
TERMS:
Spread - the difference in yield between a non-government and government fixed income security.
Duration - approximate percentage change in a price of a bond for a 1% change in yield.
Author
Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.