Cazenove Capital investment team current views - July 2018
The Cazenove Capital investment team provide their current views on asset classes based on the status of markets.
Improved valuations following on from strong earnings growth.
We prefer USD bonds versus EUR and GBP bonds, particularly inflation-linked bonds.
Attractive diversification characteristics compared to equities and fixed interest.
Cash has defensive and opportunistic qualities in uncertain and volatile markets.
The UK is now one of the slowest growing economies in the G7. Brexit uncertainty leads us to remain cautious.
Slowdown in domestic economic growth and increased trade tensions could hamper earnings.
Strong US consumer and tax reform are supportive to earnings growth.
Japan has the most accommodative monetary policy and the yen remains undervalued.
Escalating trade wars are a concern but solid and consistent earnings growth supportive.
Emerging markets valuations look attractive relative to Western developed markets.
We remain negative on GBP and EUR bonds but US Treasuries are relatively more attractive given the normalisation of yields that is taking place.
Credit spreads provide a small pick-up in yields, but are at a historically narrow level so capital gains are unlikely. Returns will be driven by government bond markets. We see opportunities in some shorter maturity areas of the markets.
High-yield credit spreads are at a historically low level compared to Investment Grade credit spreads, so we remain wary.
Inflation-linked government bonds remain relatively attractive compared to conventional government bonds and will outperform if inflation expectations rise, which we anticipate. Recent strong performance by US TIPS prompted our recent downgrade.
Selectively, local emerging market bonds offer good interest rate and currency exposure.
Increased volatility and dispersion of returns should provide opportunities. We favour trend followers and long/short equity strategies.
Commercial property (UK)
Post-Brexit concerns have resulted in the marking down of property valuations, but income characteristics remain attractive.
Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.
The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored.