Our multi-asset investment views - May 2018

We are still positive, as profit growth should continue to support stocks. Recent weak economic data and a strengthening dollar could be a near-term hindrance though.

Bond yields have risen recently, which makes them more attractive relative to recent history. But we think there are more rises to come (n.b. bond prices fall as yields rise).

Commodity markets are seeing strong momentum and the economic backdrop remains supportive.

We have downgraded to single negative, as we are in the late phase of the economic cycle and companies’ borrowing levels are high.

Valuations look high, but we expect US profit growth will continue to be strong in 2018, driven in part by the President Trump’s tax cuts and companies buying back shares.

We expect European growth to remain strong, although we are monitoring the impact of a stronger euro.

We remain neutral on UK equities due to the uncertainties around Brexit implications and better opportunities elsewhere.

Downgraded Japan to single positive as we do not see an immediate catalyst which would allow Japan to perform better than the other major stockmarkets.

Singapore ranks as our most attractive country, as growth in company profits is as strong as the US, but is combined with more attractive valuations.

Our positive views on emerging markets remain unchanged, with stronger growth and relatively cheaper valuations.

US government bonds (Treasuries) continue to look expensive. Especially considering the large increase in supply and higher yields available in Europe.

We remain neutral. We don’t foresee a buying opportunity for the time being and the market isn’t expecting a rise in the base rate until November.

The European Central Bank should end its huge bond buying programme (quantitative easing) this year, so German bunds are one of our main underweights alongside US Treasuries.

No change. It’s too early to downgrade it yet as Japan’s central bank looks like standing firm with its current policy of economic stimulus.

We remain positive on inflation due to wage inflation and a rising oil price.

Downgraded our view to neutral. Yields have become less attractive as developed market yields have increased. Also, political uncertainty looms with upcoming elections.

US companies face higher costs of borrowing, which is likely to be negative for IG corporate bonds as firms have less money to service existing debts.

European IG corporate bonds still look expensive despite recent good performance.

We have downgraded emerging market US dollar bonds, as we don’t think they are attractive at this stage of the economic cycle or with current valuations.

After good performance so far this year, we have downgraded US non-investment grade corporate bonds (high yield) to neutral. Valuations don’t look attractive.

Although the backdrop has improved, valuations do not yet look very compelling, hence we stay neutral.

We maintain our positive view and think Middle East tensions and a collapse in Venezuelan oil production will support the oil price.

We remain negative on gold which we expect to struggle in an environment of rising bond yields and the stronger US dollar.

These continue to look attractive amid globally synchronised growth and a strong and stable Chinese economy. The sector has also seen good recent momentum.

We are positive on agricultural commodities, expecting them to perform well on the back of favourable supply/demand dynamics.

There are signs of dollar appreciation but we are concerned about the effect of higher US interest rates might have on the currency.

We have downgraded to negative, as we anticipate sterling continuing to fall because of slowing economic activity and reduced post-Brexit flows of capital into the country.

We expect the pace of euro strength to moderate in the coming months.

As long as US-China trade tensions remain contained, their economic impact is limited. If the yen surges as a “safe haven” asset, it would be a headwind to Japanese exports.

We remain neutral as we continue to expect minimal intervention by the Swiss National Bank.