Investment Conclusions September 2019

•Our risk exposure is neutral as we await more clarity about the near-term macro environment.

•We have moved all corporate credit bond classes down either to underweight or double underweight positions. This summer’s fixed income rally has sent yields down for all qualities. The risk-reward for neither Eurozone Investment Grade bonds, Global High Yield nor Emerging Debt are now attractive.

•In our Low-Risk portfolio, we have lifted our weight in Long Eurozone High-Quality Government bonds and US Short High-Quality bonds (unhedged).

•In our High-Risk portfolio, we keep double underweight positions for our two High-Risk Corporate Credit fixed income classes. Instead, we overweight US Equities and Emerging Equities. The latter for the first time since March 19.

•With the ‘help’ from Brexit uncertainties, the soft Eurozone economy and fresh stimulus from ECB, we now underweight EUR & DKK and overweight CHF, JPY, and USD.  

•At the moment, the most significant support to Risk Assets is Liquidity, which has been underpinned by intervention from global central banks (FED, PBoC, ECB). Without significant trade policy disruption or unexpected worsening of the global business cycle, we anticipate that most of the help to multi-asset performance from FED and other central banks is now behind us.

•Business cycle leads suggests that there is potential for a growth pick-up around year end 2019. The potential recovery may, however, still be disturbed by the escalating trade war and a possible Hard Brexit.

•The CAP-M Live portfolio rose 80bps, while CAP-M++ also picked-up 80bps from July. Our benchmark was up 70bps in the same period. The CAP-M Live has in 2019 risen 12.3%.