BNP PARIBAS ASSET MANAGEMENT - Finance 1 1440x300
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.
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BNP PARIBAS ASSET MANAGEMENT - TM Small cap 1 1440x300
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The six key themes for US Treasuries in Q4 2018

The primary themes impacting the yields of US Treasuries and the pricing of future levels of inflation (via breakeven inflation rates (BEIs)) have changed little in the last few months. They continue to generate a range-trading environment for US Treasury bonds and TIPS.