Asset allocation analysis, Investment strategy

Asset allocation update – September 2018

10 September 2018 - Guillermo Felices, Head of Research and Strategy & Colin Harte, Head of Research - MAQS

We remain long equities and underweight fixed income, notably in the eurozone, but we trimmed our risk exposure

  • August’s main market moves have mirrored some of this year’s key trends: US equities have continued to outperform major markets such as that of the eurozone and the emerging markets.
  • The outperformance partly reflected the divergence between the US economy – supported by fiscal expansion and a patient Federal Reserve – and relatively weaker growth in the eurozone and EM. But there is more to this. The US equity rally has been led by the IT sector. This is now looking stretched on various metrics.
  • The other salient development was renewed stress in emerging markets. A combination of economic stress in Turkey, weaker growth in China, Sino-US trade tensions and a stronger US dollar hurt EM assets.
  • We believe there is value in EM assets, but the obvious circuit-breakers are still absent: a weaker USD, aggressive China stimulus and fresh Sino-US trade talks.
On the same subject:
TIR cover
14 March 2019

In a world striving for greater sustainability, investment in coal – be it mining or power generation – should be much more selective, hence our new coal investment policy. Also in this issue: how to navigate markets as they swing between the impact of news on the fundamentals and adjustments in central bank liquidity; what to make of the trends in US inflation; and our assessment of the relations and economies of China and the US.

13 February 2019

With the structural direction of equities unclear, we prefer to be neutral in the medium to long term. We are structurally underweight in fixed income as we foresee gradually rising inflation and further monetary policy normalisation.

13 February 2019

Struggling for some time now to hit its inflation mark sustainably, the Federal Open Market Committee may move to adopt average inflation targeting, or even temporary price level targeting, in its upcoming strategy review. Such a shift should steepen the Treasury curve, lower real interest rates, and support a widening of long-forward TIPS breakevens.

Webcast – A focus on the US and China: their relations and economies

An explanation on why China wants a trade deal and how the US feels about this