Current views - November 2018
Our investment team assesses the prospects for a range of asset classes and currencies
07/11/2018
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
Pockets of opportunity in the UK, but Brexit uncertainty continues to weigh on sentiment.
European
Slowdown in domestic economic growth, increased trade tensions and Italian politics could hamper earnings.
North American
Strong US consumer and tax reform are supportive to earnings growth.
Japanese
Rising inflation offsets concern about the upcoming consumption tax hike.
Asia Pacific
Solid and consistent earnings growth is supportive, but trade war remains a headwind.
Emerging markets
Valuations look attractive relative to Western developed markets, but trade war remains a headwind.
Fixed income
Government bonds
US Treasuries are relatively more attractive given the normalisation of yields that is taking place. We are cautious on European government bonds.
Investment grade
Returns are likely to be driven largely 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 and Emerging Market Debt 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.
Emerging markets
Emerging market bonds offer good value across the board, but struggle amid a stronger US dollar.
Alternatives
Absolute Return
Increased volatility and dispersion should provide opportunities. We favour trend followers and long/short 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
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.