Current views - May 2019

Valuations have moved above long-term averages but continued growth and central banks’ actions are supportive.

We prefer USD bonds versus EUR and GBP bonds. More attractive valuations in US inflation-linked and emerging
market bonds. Maintaining a short duration bias.

Attractive diversification characteristics compared to equities and bonds. Remain cautious on UK commercial property.

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

Brexit uncertainty continues to weigh on sentiment.

Patchy economic data and the uncertainty around trade tension continues to be a headwind.

Economic fundamentals are relatively attractive vs. rest of the world and earnings growth expectations have moderated.

Concern about the impact of the upcoming consumption tax hike.

Slowing Chinese growth and trade tensions remain headwinds but Chinese stimulus should be supportive.

Valuations and fundamentals look attractive relative to developed markets.

US Treasuries are relatively more attractive given a more supportive Federal Reserve.

Returns are likely to be driven largely by government bond markets. While corporate spreads are close to post 2009 averages, we are mindful of increasing company leverage and the late stage of the economic cycle.

Volatility will likely continue and will offer opportunities if spreads move sufficiently in either direction.

US inflation-linked government bonds are attractive compared to conventional ones and will outperform if inflation expectations rise again. UK linkers are attractive as a Brexit hedge.

Emerging market bonds generally offer good value.

We like the diversification characteristics of trend followers and long/short strategies.

Ongoing concern for the UK commercial property environment, but income characteristics remain attractive.

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