The central banks continue to take centre stage. Interpretations of monetary policy announcements and statements are positively influencing general market sentiment toward financial assets in general. Against that backdrop, the recent decisions by the Fed and the Bank of Japan show no significant departure from the accommodating policies that have prevailed to date. No change of tack then, and the theme «lower for longer» remains the order of the day. From that point of view, the market environment is positive for so-called risky assets such as equities and credit.
Diversification, or rather “Smart Diversification”, is and will be a key factor for protectingand growing investment portfolios, especially in an environment where positive correlations between major asset classes have increased. It is more important than ever to delve deeper into asset classes and sub-asset classes to ensure we uncover the most appropriate exposures, which in combination give stability to an investment portfolio.
The key messages of this new edition are:
Financial markets continue to be heavily influenced by central banks, particularly by those in Japan and the US.
Our investment scenario remains cautious and focuses on balanced allocation
We are taking a constructive and tactical approach to action as we approach the next results season.
The Fed rate hike cycle will be slower than expected and will limit the potential rise in the US dollar.