Publications

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.

06/07/2018

KEY

Asset classes

 
 
 

Equities

Improved valuations following on from strong earnings growth.

 
 

Fixed income

We prefer USD bonds versus EUR and GBP bonds, particularly inflation-linked bonds.

 
 

Alternatives

Attractive diversification characteristics compared to equities and fixed interest.

 
 

Cash

Cash has defensive and opportunistic qualities in uncertain and volatile markets.

 

Equities

 
 
 

UK

The UK is now one of the slowest growing economies in the G7. Brexit uncertainty leads us to remain cautious.

 
 

European

Slowdown in domestic economic growth and increased trade tensions could hamper earnings.

 
 

North American

Strong US consumer and tax reform are supportive to earnings growth.

 
 

Japanese

Japan has the most accommodative monetary policy and the yen remains undervalued.

 
 

Asia Pacific

Escalating trade wars are a concern but solid and consistent earnings growth supportive.

 
 

Emerging markets

Emerging markets valuations look attractive relative to Western developed markets.

 

Fixed income

 
 
 

Government bonds

We remain negative on GBP and EUR bonds but US Treasuries are relatively more attractive given the normalisation of yields that is taking place.

 
 

Investment grade

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

High-yield credit spreads are at a historically low level compared to Investment Grade credit spreads, so we remain wary.

 
 

Inflation-linked

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.

 
 

Emerging markets

Selectively, local emerging market bonds offer good interest rate and currency exposure.

 

Alternatives

 
 
 

Absolute

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.

 
 

Commodities

Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.

 

Author

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. 

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