Outlook & Convictions N°5

Analysis - 7/11/2019

Nowadays, politics are making the markets

Edmond de Rothschild publishes the fifth 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

> Higher customs tariffs and persistent US-China tensions will continue to weigh on trade and global growth…

> … amid soft domestic demand in China and a slackening in US imports..

> But increased budgetary spending in Europe and monetary policy easing should limit the extent of the global slowdown we expect to see.

ASSET ALLOCATION

> Central banks have played a pivotal role in creating big market swings over the last 12 months.

> Markets have disconnected from fundamentals, a risky development.

> Given the current environment, we have left our asset allocation unchanged; it remains balanced but has become a little more cautious in recent months.

FIXED INCOME

> US Treasuries: we see opportunities in the intermediate part of the 5-year yield curve.

> We remain cautious on Europe but have overall maintained positive sensitivity.

> Subordinated debt and hard-currency emerging country bonds still offer attractive entry points.

 

EQUITIES

> Supportive near-term macro conditions remain in place.

> Key for us though is the medium term earnings outlook.

> Secular influences that have driven equities throughout the past four decades are waning and must be factored in by investors. 

SRI MANAGEMENT

> Our integrated approach based on proprietary research is clearly a strong point.

> Bringing financial and extra-financial analyses together means reducing risk… 

> … and helps identify new investment ideas.

 

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