Current views - February 2018
Our investment team provides their current views on asset classes based on the status of markets.
Concerns over continuing economic strength in light of Brexit and that the previous tailwind from weaker sterling may be behind us leads to a more cautious stance.
Strong cyclical upturn in economic growth is supportive but investors already positioned for this.
Potential for a strong increase in growth and earnings is offset by higher valuations.
Strong global trade and household consumption support growth, and ongoing monetary stimulus is positive
The increase in global trade is helpful to Asia Pacific although they performed strongly in 2017.
Continued global growth should be supportive to emerging markets that are cheap relative to developed markets.
We remain negative on GBP and euro bonds but US Treasuries are becoming relatively more attractive given the normalisation of yields that is taking place.
Credit spreads provide a small pick-up but are at a historically narrow level.
High yield credit spreads are at a historically tight level so we are wary of excessive exposure.
Inflation-linked government bonds remain attractive and provide a hedge against unexpected higher inflation.
Selectively, local emerging market bonds offer good interest rate and currency exposure.
Increased volatility and dispersion should provide opportunities.
Absolute: fixed income
Lower liquidity and flatter rate profiles reduce the attractiveness of many strategies.
Increased volatility across many asset classes should counter lower rate cycles.
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 as an inflation hedge.
Ongoing excess supply is likely to weigh on prices for some time.
Oil continues to be volatile as politics and supply concerns dominate the market.
Cash has defensive and opportunistic qualities in uncertain and volatile markets.
This article is issued by Cazenove Capital which is part of the Schroder Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 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.