Foreign exchange – carry still matters
By Romain Cabasson – Senior Portfolio Manager; Multi-Assets – Core Investments
- Cautious optimism on global growth may finally be the catalyst for some US dollar weakness in 2020.
- However, this may not benefit the euro, as carry still matters a lot to investors.
- We believe the Canadian dollar is a better ‘upside’ choice than the Australian dollar, and the Japanese yen a better safe-haven than the Swiss franc.
Rates – Modest performance likely in 2020
By Alessandro Tentori - AXA IM Italy CIO and Rates Strategist Research – Core Investments
- Monetary policy has amplified an already strong “grab-for-yield” environment. As a result, performance has been solid across fixed income.
- The focus is shifting away from conventional policy tools, as central banks are in the process of re-thinking their strategy and their instrument mix.
- Looking ahead, elements of risk in fixed income such as low volatility, negative-term premia, liquidity risk, are likely to affect performance in the rates markets.
Credit – endless summer amid growth lowlands
By Gregory Venizelos, Credit Strategist, Research – Core Investments
- It has been a year of strong returns for credit, stellar even for long duration markets.
- The duration pendulum should swing in favour of high yield in 2020, barring a bad downturn in growth.
- Neither the large BBB rated cohort nor covenant-lite loans are likely to upend credit markets in 2020.
A decade into the cycle – it’s still hard to be bearish
By Varun Ghotgalkar, Equity Strategist, Research – Core Investments
- Our leading earnings indicators suggest that earnings growth momentum is starting to trough and is likely to pick up in the second half of 2020.
- Equity valuations are close to long term averages and still provide relative value against sovereign bond and credit markets compared to historical standards.
- We keep a constructive stance on equities moving into 2020, with a bias towards undervalued cyclical plays in our allocation.
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