Our multi-asset investment views - June 2018
We've downgraded our view on equities this month in Europe, Japan, Pacific ex-Japan and emerging markets. Here's why.
25 June 2018
We have downgraded equities to neutral, reflecting our more cautious stance. We are seeing positive news on company profits less frequently and a number of upcoming political events could increase investor nervousness.
Bonds have become less expensive, but are not yet attractive enough, so we remain negative.
The economic environment remains supportive of commodities.
We are in the late phase of the economic cycle, plus we are seeing central banks raising interest rates. Neither of which is positive for corporate bonds.
The US continues to be the most resilient economy and we are still seeing many companies reporting better-than-expected profits.
We have downgraded Europe to neutral. It appears that Europe’s economy is slowing down. Political risk is also in focus again.
We remain neutral due in part to the uncertainty around on-going Brexit negotiations.
We have downgraded Japan to neutral. Its economy also appears to be slowing down, and there is a risk of the yen strengthening (which tends to be negative for stocks.
Downgraded to neutral. Within the region, we favour Singapore – where the outlook has steadily improved – over Australia – whose economy faces challenges.
We have downgraded to single positive. Valuations are relatively attractive, but trade tensions, elections and a stronger dollar prove hindrances in the near term.
We remain negative as they are still expensive, there has been a large increase in supply, and higher yields are available in Europe.
We have downgraded UK gilts to negative, to bring our score in line with other major markets and because of their recent outperformance.
The European Central Bank will remove a significant support for German bonds (bunds) when it starts reducing its quantitative easing programme later this year.
No change. It is still too early to downgrade this market as it looks like the central bank will continue to support the market for now.
US inflation linked
We remain positive but are becoming more cautious.
Emerging markets local
We remain neutral after last month’s downgrade, although potential risks have grown.
Investment grade (IG) corporate bonds
US IG corporate bonds
Higher borrowing costs are likely to put pressure on the sector.
European IG corporate bonds
Although the picture has improved, European investment grade corporate bonds still do not look attractively valued.
Emerging markets USD
After the recent selloff, we used the opportunity to upgrade to neutral. Valuations are still not compelling but the yields on offer are attractive.
High yield bonds
This is the best-performing market year-to-date, but we remain neutral.
Political risk in Europe, particularly related to Italy, has put pressure on the sector.
Global demand for oil remains stable, particularly from China and India, while falling Venezuelan output and upcoming sanctions against Iran remain supportive.
We remain negative on gold, which we expect to struggle in an environment of rising real yields and the stronger US dollar.
Continue to look attractive against a backdrop of globally synchronised growth and a strong and stable Chinese economy.
Favourable supply/demand dynamics lead us to retain a positive view.
We believe that temporary factors such as trade protectionism and political risk will keep the US dollar stronger than its fundamentals imply.
Pound sterling is still driven by Brexit newsflow and our negative view is unchanged.
We believe that European economic activity will recover from recent weakness, with the European Central Bank announcing the end of quantitative easing this year.
Japanese yen ¥
We remain neutral. There could be some strengthening in yen’s value, but that is likely to come mainly as a result of investors using it as a hedge, rather than any fundamental reasons.
Swiss franc ₣
We continue to hold a neutral view on the Swiss franc and we don’t expect the Swiss National Bank to change its current policy.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.