Questions we're tracking

From the right time to buy equities to the approval of a Brexit deal, we offer responses to five of your top questions.

 

Will equities run out of steam?

Global stocks have come a long way in a short time. Since the December low, the MSCI All Country Index is up nearly 20%. This has been powered by a more dovish stance from the US Federal Reserve along with optimism over the outcome of US–China trade talks. But a great deal of good news has already been priced into stocks, making it a good time for investors to take some profit. At current levels, we would like to see more confirmation that growth and inflation have stabilized before increasing risk.

Want to know more?

Read the one pager by the Chief Investment Office


 

Is the Fed tightening cycle over?

The Federal Reserve's monetary policy stance has shifted from "autopilot" to "patient", raising the question of whether the central bank has finished hiking rates in this cycle. In March the Fed cut its forecast for rate hikes this year from two to zero and announced it will end its balance sheet run-off in September rather than in 2020. Markets are pricing in a rate cut in the next 12 months but the Fed's median forecast points to one hike in 2020.

Want to know more?

Read the one pager by the Chief Investment Office


 

Could we see a US-China trade breakthrough?

Long-running trade tensions have been a major preoccupation for investors. US trade relations with China remain fragile, even as high-level trade talks continue. In addition to the feud with China, the US continues to threaten higher tariffs on auto imports, which if implemented could hit Germany and Japan especially hard. But while a renewed trade escalation remains a risk, there are promising signs that President Trump is willing to compromise and is not impervious to the economic impact of his trade policies. Markets are also supported by continued economic growth and rising earnings.

Want to know more?

Read the one pager by the Chief Investment Office


 

Should the yield curve worry investors?

In March, for the first time since 2007, a part of the US yield curve inverted, a move traditionally seen as a harbinger of recession. The yield on 3-month Treasury bills rose as much as 11bps past the yield on 10-year Treasury bonds. We see no cause for concern and the inversion ended after only a week. An inverted yield curve has only predicted recessions with long and variable delays. It may prove less prophetic this time, since central banks' bond buying has suppressed yields on long-duration bonds. We do not expect a global recession this year.

Want to know more?

Read the one pager by the Chief Investment Office


 

May's Brexit, slow Brexit, or no Brexit?

Paragraph: Fresh twists in the Brexit saga have become a daily occurrence. Having failed to win approval for her plan from lawmakers, UK Prime Minister Theresa May has been forced to request a further delay to Brexit - which the EU has agreed to push back to October 31. The eventual denouement remains hard to predict, and options range from a no-deal Brexit to a significant delay with no exit at all. Meanwhile, uncertainty over the process remains a drag on business investment both in the UK and Eurozone. Given the difficulty in predicting the final outcome, we do not recommend taking directional views on sterling.

Want to know more?

Read the one pager by the Chief Investment Office

Knowledge is power

Subscribe to the Weekly round-up newsletter to receive top CIO content directly in your inbox