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Outlook & Convictions n°1

Analysis - 7/26/2017

Edmond de Rothschild publishes the first 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 at a turning point?

  • The economic outlook has improved in most regions and inflation is back but business investment has remained weak
  • Chinese economic policy is key for global GDP growth in the second half of 2017 as the stimulus package announced by the American President is slow in coming
  • The eurozone continues to strengthen financially and politically and the euro is solid

ASSET ALLOCATION

Europe has regained its lustre

    • Allocation: focus on equities at the expense of bonds; prefer regions with strong earnings growth potential
    • Equities: overweight the eurozone, underweight the US
    • Bonds: spotlight on subordinated financials. Avoid interest rate risk

FIXED INCOME

End of the quantitative easing road: where do we see opportunity and risk?

  • The leading central banks are preparing to undo the mammoth unconventional monetary policies they have pursued in recent years
  • One of the markets’ drivers is therefore set to turn against them, but this should not change the bigger picture much

 

 

Can investors still rely on bonds to provide safe, low-risk returns in the mid-single-digit range?


EQUITIES

Favourable tailwinds for now, but don’t ignore valuations

  • Resurgent corporate profit growth and benign monetary conditions support the case for equities for now
  • We see this period as an extension of the already mature business cycle, not a new one
  • Markets are likely to continue to be characterized by rolling sector rotations until clear signs of the next recession

IDEAS

Myopic loss aversion and remembering one’s strategic asset allocation

  • There is a direct link between the frequency of checking one’s portfolio and risk-taking
  • By drawing up a strategic asset allocation and keeping it in mind, investors can better accept the turbulence encountered by individual assets

 


DISCLAIMER

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


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