Asset allocation
Largely positive quarterly figures and surprisingly dynamic and robust economic data from the US and Europe are bolstering the equity market. …
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Despite the increase in real interest rates, equities continue to off er more attractive yields than “quality government bonds”.
We remain overweight in equities and prefer corporate bonds to government bonds.
Bonds
The unexpectedly strong economic indicators from many quarters justify the persistent normalisation of real yields. There is no evidence of infl ationary risks.
Volatility is likely to remain high ahead of the next FOMC meeting. However, the steepness of the curve will limit any potential rise in interest rates.
We favour corporate and emerging market bonds due to the attractive valuation.
Equities
Investors continue to approach emerging market equities with a certain degree of scepticism.
Financials and consumer discretionaries, in particular, posted surprisingly positive quarterly profits.
We favour equities from the consumer discretionary, healthcare, financial and IT sectors.
Alternative investments
Commodities: The asset class remains vulnerable. The supply-side driven shortages across the energy segment are up against challenging macroeconomic headwinds.
We continue to favour the energy sector.
Real estate: In an increasingly diffi cult interest rate environment, property funds have shown their strength.
Because of the high distribution yield, we favour funds that invest primarily in commercial property.
Currencies
The forward guidance introduced by the ECB and the Bank of England has not had the desired eff ect on the euro and the pound sterling.
The latest economic data suggest that the Fed will decide to taper its bond purchases as early as September.
We favour Scandinavian currencies and the US dollar over the euro and the Swiss franc.
Source: ETFWorld – Swiss & Global
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