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Cautiously constructive, consciously reactive

Investment strategy

Maximilian MOLDASCHL


This article 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.

Macroeconomic Views

  • Global growth converging towards trend – slowdown to persist in 2020, but US growth should outperform Europe and Japan.
  • Central bank policy to remain easy – the room for further easing looks limited in Europe and Japan, but there is more scope in the US and China if needed.
  • Fiscal policy could be a game changer – US and Chinese policies are already expansionary, but the hurdles for European fiscal stimulus are high.

Key Themes & Risks

  • ‘Fragile goldilocks’ holds – data are stabilising, central bank policy is loose, and short-term de-globalisation dynamics are supporting risky assets.
  • Beware the risks – after a strong 2019, our base case is vulnerable to a more entrenched ‘synchronised slowdown’ or a sustained ‘reflation’ environment.
  • Fixed income is most at risk – we see fixed income markets as being most at risk from a sustained move to reflation.

Asset allocation

  • Modus operandi: nimble & diversifying – strategic risk/reward is unattractive as our base case is also vulnerable to tail risks/end-cycle dynamics. We see merit in a nimble approach and in building robust portfolios/diversifying.
  • Overweight equities – in the latest dip, we added overweight positions in equities again, and aim to remain nimble.
  • Underweight core EMU duration – we aim to be nimble and have reduced our short exposure given yield moves. But risks from reflation remain large for rates.
  • Search for yield – we still believe in searching for yield. We are maintaining a high-carry EM external debt position and an EMU REITs trade.

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