Sumary        

·        De-globalisation relief and reflation

o   positive geopolitical news has caused markets to trade in a reflationary fashion

o   this may last in the short term, but further out things look trickier

·         Fixed income most at risk

o   we still see fixed income markets as being most at risk from a sustained move to a reflationary environment

·         Weak data, but no imminent recession

o   we acknowledge the slowdown in the macroeconomic data, but think it is too early to call a recession just yet

·         Key differences to Q4 2018

o   while the macro environment feels similarly weak, the central bank stance, valuations and positioning are clearly different

Asset allocation

·         MFA portfolio optimiser

o   we have introduced our new asset allocation portfolio optimiser which uses factor analysis to map core asset views to factor exposures

o   we will therefore now also communicate views from a factor viewpoint

·         Factor exposure

o   in the overall factor exposures from our current views, the standout is an overweight in Market Risk

o   other factor exposures are light

·         Overweight equities

o   we remain nimble and in a recent dip we added equity overweights, the main contributor to the overweight in the Market Risk factor

·         Underweight core EMU duration

o   we aim to be nimble and have reduced short exposure given yield moves

o   risks from reflation remain large for rates

·         Search for yield

o   we still believe in searching for yield

o   we remain in a high-carry EM external debt position and have added EMU REITs

·         Robust portfolios

o   we continue to hold trades with asymmetries to our risk scenarios

o   these include long US breakeven inflation and several de-globalisation trades

For the full report please see the attached pdf.