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Outlook & Convictions n°2 - January 2018

Analysis - 1/24/2018

Edmond de Rothschild publishes the second edition of its House View.

This publication presents Edmond de Rothschild’s key convictions for macroeconomics, asset allocation strategy, and the principal asset classes. The summary of this document is below. 


MACRO OUTLOOK

Global growth defying gravity

  • US growth could edge up further in 2018, fuelled by the roll-out of the tax cuts agreed by the Republicans …
  • … and might be able to pick up some of the slowdown in GDP growth left by China
  • Central banks is likely to continue to control interest rates and “manage” asset prices

ASSET ALLOCATION

Will the Goldilocks story continue on financial markets?

    • Asset allocation: we prefer equities to bonds
    • Equities: caution advised early in the year; add to positions on a pullback
    • Bonds: interest rate risk high; discrimination needed in credit

FIXED INCOME

Don’t feel obliged to invest in bonds

  • Long-term rates are feeling mild upside pressure
  • Risks and opportunities are both very limited
  • Our preference goes to subordinated financial bonds

EQUITIES

More muted equity return outlook with higher volatility

  • From here, a continuation of benign macro conditions is crucial for further equity price appreciation
  • Sticking with our preference for European shares
  • Rotation away from technology and growth shares likely but this may not be enduring

IDEAS

A bit of theory on asset bubbles

  • Low interest rates make fertile ground
  • Human nature plays a not inconsiderable part as well
  • Every bubble is unique but they all have the same structure

Drafting finalised on 10 January 2018

AVERTISSEMENT

This brochure was prepared by Edmond de Rothschild Asset Management (France). The following entities, including their branch offices and subsidiaries, limit themselves to making this brochure available to clients: Edmond de Rothschild (Suisse) S.A., located at 18 rue de Hesse 1204 Geneva, Switzerland, subject to the supervision of the FINMA, Edmond de Rothschild (Europe) S.A., located at 20 boulevard Emmanuel Servais, 2535 Luxembourg, Grand Duchy of Luxembourg, and subject to the supervision of the Luxembourg Commission de Surveillance du Secteur Financier (CSSF), and Edmond de Rothschild (France), Société Anonyme governed by an executive board and a supervisory board with a share capital of 83 075 820 euros – RCS Paris  572 037 026, located at 47 rue du Faubourg Saint-Honoré 75008 Paris.

This document is non-binding and its content is exclusively for information purpose. Any reproduction, disclosure or dissemination of this material in whole or in part without prior consent from the Edmond de Rothschild Group is strictly prohibited.

The information provided in this document should not be considered as an offer, an inducement, or solicitation to deal, by anyone in any jurisdiction where it would be unlawful or where the person providing it is not qualified to do so. It is not intended to constitute, and should not be construed as investment, legal, or tax advice, nor as a recommendation to buy, sell or continue to hold any investment. Edmond de Rothschild Asset Management or any other entity of the Edmond de Rothschild Group shall incur no liability for any investment decisions based on this document.

This document has not been reviewed or approved by any regulator in any jurisdiction. The figures, comments, forward looking statements and elements provided in this document reflect the opinion of Edmond de Rothschild Asset Management on market trends based on economic data and information available as of today. They may no longer be relevant when investors read this communication. In addition, Edmond de Rothschild Asset Management shall assume no liability for the quality or accuracy of information / economic data provided by third parties.

Any investment involves specific risks. We recommend investors to ensure the suitability and/or appropriateness of any investment to its individual situation, using appropriate independent advice, where necessary. Past performance and past volatility are not reliable indicators for future performance and future volatility. Performance may vary over time and be independently affected by, inter alia, changes in exchange rates.

Edmond de Rothschild Asset Management refers to the Asset Management division of the Edmond de Rothschild Group. In addition, it is the commercial name of the asset management entities of the Edmond de Rothschild Group.

 

EDMOND DE ROTHSCHILD ASSET MANAGEMENT (France)

47, rue du Faubourg Saint-Honoré - 75401 Paris Cedex 08 - France

Société anonyme governed by an executive board and a supervisory board with capital of 11.033.769 euros AMF Registration number GP 04000015 – 332.652.536 R.C.S. Paris