Current views - May 2019
Our investment team assesses the prospects for a range of asset classes and currencies
06/05/2019
Key
Asset classes
Equities
Valuations have moved above long-term averages but continued growth and central banks’ actions are supportive.
Bonds
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.
Alternatives
Attractive diversification characteristics compared to equities and bonds. Remain cautious on UK commercial property.
Cash
Cash has defensive and opportunistic qualities in uncertain and volatile markets.
Equities
UK
Brexit uncertainty continues to weigh on sentiment.
European
Patchy economic data and the uncertainty around trade tension continues to be a headwind.
North American
Economic fundamentals are relatively attractive vs. rest of the world and earnings growth expectations have moderated.
Japanese
Concern about the impact of the upcoming consumption tax hike.
Asia Pacific
Slowing Chinese growth and trade tensions remain headwinds but Chinese stimulus should be supportive.
Emerging markets
Valuations and fundamentals look attractive relative to developed markets.
Bonds
Government bonds
US Treasuries are relatively more attractive given a more supportive Federal Reserve.
Investment grade
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.
High-yield
Volatility will likely continue and will offer opportunities if spreads move sufficiently in either direction.
Inflation-linked
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 markets
Emerging market bonds generally offer good value.
Alternatives
Absolute return
We like the diversification characteristics of trend followers and long/short strategies.
Commercial property (UK)
Ongoing concern for the UK commercial property environment, but income characteristics remain attractive.
Commodities
Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.
Author
This article is issued by Cazenove Capital which is part of the Schroders 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.