Don’t fight the Feds. For the near term, aggregate central bank balance sheet expansion remains a tailwind. With real rates compressed and asset classes fully priced, we seek relative value: U.S. high yield, European bank capital & EM local currency debt.
Asset allocation for a world of continued global growth - Amid a synchronized pick-up in global growth and loose financial conditions, we maintain a pro-risk tilt in our asset allocation. Rates are set to rise, but only slowly, so we maintain a small underweight to duration together with a modest overweight to stocks, diversified across regions. We remain neutral on credit.
This paper, written by Ian Hui, addresses MSCI's announcement of delaying the inclusion of China A shares in their benchmark Emerging Markets Index and discusses the relevant implications.
Chief Market Strategist Stephanie Flanders discusses Britain's place in the EU and the pre-referendum landscape and despite of how a vote in favor of remaining in the European Union is probable, a “no” vote in the coming UK referendum is a distinct possibility and is something investors should be prepared for.
And what if Britain does votes to leave? Short-term economic and market impact and longer-term consequences are also discussed. But the transition to a new set of arrangements would be messy and potentially very costly, not just for the UK but also its closest trading partners.
Latest data suggest growth in 1Q 2016 continues to slow down and approach the 6.5% bottom line set by the government. Having said that, investors need to read the latest data with a grain of salt, as some could be distorted by the timing of the Chinese New Year holidays. We await the cleaner March data to provide more clarity on the underlying growth trend.
Given the low base and better sentiment, China’s macro data in March could show some improvement from January to February, including the Purchasing Managers’ Index (PMI), exports and industrial production
The still-soft economic momentum and the recent reserve requirement ratio (RRR) cut suggest growth stabilization will likely remain the government’s priority in the near term.
Despite setting a lower GDP target, we believe growth is still the top priority for China this year, as both monetary and fiscal policies will be supportive of growth.
The government reiterated its plan to accelerate the urbanization process as labor market conditions remain favorable, which is a much needed step in reducing the level of housing stock. China will continue to push through its supply side, state-owned enterprise and financial reforms, albeit at a slow pace.
The next five years are crucial for China to avoid falling into the “middle-income trap,” suggesting why this year’s policy maintains an appropriate expansion of aggregate demand. However, ignoring the excessive pace of debt accumulation may likely bring negative consequences to the real economy in the long term.
Market confidence has been badly hurt in the opening weeks of the year as investors worry about the possibility of a global recession. We believe these fears are probably overdone and investors should take a step back and look at the big picture, particularly in the eurozone.
The eurozone saw moderate economic growth in 2015 of around 1.5%, and we see several reasons why this momentum should be sustained this year, including further support from the European Central Bank (ECB), more supportive fiscal policy and cheaper energy.
Some European sectors and companies will be negatively affected by weakness in global trade and the slowdown in China and other emerging markets. On balance, however, we believe that the domestic drivers for eurozone growth can offset these negatives. In this note we briefly outline those positive forces and restate the case for active investors to retain their exposure to regional risk assets.
This paper, written by Marcella Chow, discusses how the soft December data, including slower 4Q15 GDP growth, may add to concerns about China’s economic health.
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