“Successful investing is anticipating the anticipations of others.”
John Maynard Keynes
Macro Environment
- Inflation pressure in developed markets is subdued
- European growth loses momentum
- US consumer confidence remains intact while capital markets become more fragile
- Emerging markets growth remains robust while confidence numbers paint a less favorable picture
Outlook and Markets
- Valuations are stretched in a lot of markets – even more so after the January rebound
- Trade frictions between the US and China continue to be a major market mover
- Fed changes stance and remains on hold for the time being. Rate cuts towards Q4 become possible
Main Investment Calls
- Stay cautious and keep small overweight in the income portion of the model portfolio
- Maintain an overweight in Cash
- Equities over Sovereign Bonds
- Emerging over Developed Equities
- EMD and Investment Grade Credit over Sovereign Bonds
- TIPS as an (unexpected) inflation hedge
Main Risks
- Full scale trade war between the US and China escalating further also on a political level
- Higher than expected inflation in the US, coupled with substantially increased spending leads to the Fed needing
to restart hiking rates, thus choking off economic momentum, leading to a possible recession - Unexpected fallout from a chaotic Brexit could lead to another Euro crisis and put global growth at risk
- Risks of policy missteps as China continues the attempt to rebalance its economy to a more domestically supported
one and impose too strict regulatory frameworks on banks
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