Asset allocation – October 2017
SUMMARY Market summary: equitier climb higher in low-vol environment Crude market outlook - the new oïl era Asset allocation: long EM versus DM
Equity markets continued to grind higher in September, reaching new highs while volatility dropped despite a geopolitically more agitated summer. The S&P 500 index broke above the 2 500 point level for the first time. European equities did even better with the German DAX index up by 6%. One driver was financials stocks, which benefited from a steepening yield curve. Across the English Channel, the FTSE 100 underperformed due to the rebound in sterling and a more hawkish tone from the Bank of England which signalled its intention to raise interest rates soon. Meanwhile, the US Federal Reserve started to reduce its sizeable balance sheet, inflated by several years of quantitative easing. This slow and cautious move had been well telegraphed by the Fed, so it did not destabilise markets as had the 2013 ‘tapertantrum’.
Asset Allocation October 2017
SUMMARY : Upbeat market in October, led by Japanese equities / ECB asset purchase ‘recalibration’: still accommodative / EM: renewed idiosyncratic risks?
Converging Australian and US yields spark profit-taking
SUMMARY • Risk assets: under the weather • Upbeat global growth • Asset allocation: back to underweight duration, still bearish on euro versus US dollar
US inflation on a rising trend
Our outlook for US inflation and growth has brightened considerably since the start of 2018, so we have lifted our targets for both US Treasury yields and TIPS-based breakeven inflation rates. Here, we review the factors we see as contributing to the rise in US inflation and we look at the potential monetary policy response from the Federal Reserve (Fed).