Quarterly Investment Strategy – Key highlights

Key highlights

• Without a genuine de-escalation of the US-China dispute, involving a significant reduction in existing import duties, a revival in global output and trade is not to be expected.
• Resilient consumption has upheld US growth in recent months – although the picture is becoming more complicated as job growth slows and sectors like manufacturing and business investment emit signs of concern.
• In Europe, the ECB is taking extensive action to counter the continuing – even extending – slowdown, but the potency of its measures is doubtful.
• Having just implemented the much-awaited VAT hike, Japanese policymakers will now focus on containing the near-term economic fallout.
• Trade uncertainty is taking its toll on emerging economies, but improved fundamentals and extensive monetary easing are helping them navigate the tougher global waters.
• The 4th quarter could see a continuation of recent market dynamics, with the global trade outlook determining investor appetite for equities. We maintain a defensive asset allocation, underweighting equities and overweighting both gold and the Japanese yen – while still clearly favouring carry strategies.
• Although the USD will retain its safe haven status, we continue to expect modest medium-term weakness – the misalignment with fundamentals is becoming stretched and further Fed rate cuts will likely weigh on the greenback.

Read the full report here.