BNP PARIBAS ASSET MANAGEMENT - TM Major markets 1440x300
Asset allocation analysis, Investment strategy

Asset allocation monthly – March 2019

March 1, 2019 - Maximilian Moldaschl, Senior Multi-Asset Strategist, Guillermo Felices, Senior Market Strategist


This document is intended for Institutional Investors (as defined in the Securities and Futures Act, Chapter 289 of Singapore) only and is not suitable or intended for persons who do not qualify as such.


  • Central banks turning dovish again – Markets rallied further in February, with the perceived pause in US monetary policy tightening acting as a major driver; easing measures by Chinese policymakers added to the positive backdrop.
  • Remember 2016? – We see similarities to late 2015/early 2016 when a pause in US tightening and Chinese easing measures caused risky assets and carry trades to outperform.
  • Downside growth risks persist – The economic cycle has clearly matured since 2016 and we continue to see more downside than upside risks to our base case. Given the sharp rally in markets this year, we are not chasing the recent moves.
  • Fundamentals key medium term – While investors have recently focused on the Fed’s pause, we believe economic and corporate fundamentals will ultimately drive markets. We are monitoring corporate earnings trends closely.
  • Worse risk-adjusted returns ahead Despite the year-to-date market rally, we still expect a regime change towards lower returns and more volatility as the era of quantitative easing (QE) by central banks winds down eventually.

Asset allocation

  • Directional risk/reward unattractive – With risk assets sat bang in the middle of our scenario analysis range and downside risks to our macroeconomic base case lingering, we find the directional risk/reward in stock markets unattractive.
  • Strategically neutral equities – Our preferred long-term allocation to equity markets overall remains neutral.
  • Underweight fixed income – We remain underweight EMU bonds, having added a further short in 10-year German Bunds after recent bullish price action. In the medium term, the outlook for EMU yields is skewed to the upside.
  • Building robust portfolios and diversifying – Given the uncertain macro backdrop, we regard building robust portfolios and holding diversification trades as key at this point of the cycle. We hold several positions/RV trades with asymmetries.

BNP PARIBAS ASSET MANAGEMENT UK Limited, “the investment company”, is authorised and regulated by the Financial Conduct Authority. Registered in England No: 02474627, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom.

This material is issued and has been prepared by the investment company. This material is produced for information purposes only and does not constitute:

1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or

2. investment advice.

Opinions included in this material constitute the judgment of the investment company at the time specified and may be subject to change without notice. The investment company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio.

Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material.

This document is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to and will be engaged in only with Professional Clients as defined in the rules of the Financial Conduct Authority. Any person who is not a relevant person should not act or rely on this document or any of its contents.

As at March 2019.

© BNP Paribas Asset Management UK Limited 2019

On the same subject:
May 8, 2019

This month Maximilian Moldaschl, Senior Multi-Asset Strategist in MAQS, explores the current goldilocks environment, explains why it is fragile, looks at what markets are pricing and concludes with the asset allocation implications.

BNP PARIBAS ASSET MANAGEMENT - TM Major markets 1440x300
May 6, 2019

Beware the risks of a fragile goldilocks

April 3, 2019

This month Guillermo Felices, Head of Research and Strategy in MAQS looks at the recent shift in central bank policy to a dovish stance, explores how this has created a goldilocks environment, explains why this is fragile however, and concludes with the asset allocation implications.

Asset allocation monthly – May 2019

Beware the risks of a fragile goldilocks