BNP PARIBAS ASSET MANAGEMENT - Finance 1 1440x300
Analyse de l'allocation d'actifs, Investmentstrategien, Market commentary

Asset allocation – May 2018

May 4, 2018 - Guillermo Felices, Head of Research and Strategy & Colin Harte, Head of Research - MAQS

SUMMARY: As in February, US Treasury yields rose to the point where they ended up rocking markets, but this time the disruption was more visible in the US dollar and emerging markets than in equity markets / We see several factors for the rise: (i) US inflation and crude oil prices hit 2018 highs in April, (ii) US macroeconomic data have been robust enough for the US Federal Reserve to continue normalising its interest-rate policy, and (iii) rates markets have become more concerned about US Treasury debt issuance / The bar is quite high for further interest-rate increases in the near term, but when policy tightening does resume, we think this will not keep equity markets from rallying as long as the growth backdrop remains solid / The stronger USD reflects disappointing economic activity data in the G10 and emerging markets compared to the US. This is consistent with markets pricing in reduced expectations of central bank policy normalisation in Europe and Japan / Further USD strength is possible, but we doubt it can persist in the medium term unless the prospects for growth in the US continue to decouple from those for the rest of the world

Global equities had a good start to the month before facing new investor concerns about rising bond yields and US inflation, in line with what happened at the end of January. The nerves were more pronounced in the US where the 10-year yield broke above 3% for the first time in four years.

The S&P 500 equity index still ended the month in modestly positive territory, in part due to supportive earnings reports. European and Japanese equity markets did better, catching up after lagging since the beginning of the year.

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SUMMARY: US equities continued to outperform other markets such as EMU and EM equities. This partly reflects the divergence between the US economy -which is supported by fiscal expansion and a patient Federal Reserve- and relatively weaker growth in the eurozone and EM. But there is more to this divergence than faster US economic growth. The US equity rally has been led by the IT sector. This has accounted for 20%-50% of US equity returns since 2016. The rally is now looking stretched on various metrics. The other salient development in August was renewed stress in emerging markets (EM). 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. EM assets prospects have soured and protectionism and tighter liquidity continue to cloud their longer-term prospects.

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Asset allocation – September 2018

SUMMARY: US equities continued to outperform other markets such as EMU and EM equities. This partly reflects the divergence between the US economy -which is supported by fiscal expansion and a patient Federal Reserve- and relatively weaker growth in the eurozone and EM. But there is more to this divergence than faster US economic growth. The US equity rally has been led by the IT sector. This has accounted for 20%-50% of US equity returns since 2016. The rally is now looking stretched on various metrics. The other salient development in August was renewed stress in emerging markets (EM). 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. EM assets prospects have soured and protectionism and tighter liquidity continue to cloud their longer-term prospects.