2021-06-14-未知机构-Q_A_on_our_asset_allocation_29页_2mb

Summary of Q&A on our Asset Allocation

Core Content

The document provides a detailed analysis of current macroeconomic trends and their implications for asset allocation across equities, fixed income, and commodities. It outlines the team's views on market dynamics, valuation factors, and the performance of different asset classes, while addressing common investor questions.

Main Points

• Sovereign Yields and Inflation: Sovereign bond yields have dropped sharply despite higher-than-expected inflation in the US. This is attributed to transitory factors such as used car and truck prices. Breakevens have fallen significantly and are at risk of further declines as supportive base effects in energy prices peak and fade.

• Equities and Credit: Global equities reached record highs, but driven by growth rather than value and cyclicals. Credit spreads have continued to tighten across investment grade (IG) and high yield (HY), with the team overweighting both. EUR credit is preferred over USD due to the risk of energy price reversals in USD-sensitive HY.

• Multi-Asset Spotlight: The document answers four key investor questions:

  1. Why the team is fading the reflation trade and rotating away from value/cyclicals.
  2. Why the team is underweight Eurozone equities.
  3. The impact of inflation on tactical asset allocation.
  4. Valuation levels across asset classes and their relevance for investment decisions.

• Macro Indicators and Growth Expectations: The majority of macro indicators show signs of exhaustion, making further growth surprises less likely. The team suggests that a peak in sequential growth rates is expected in Q2, with mixed to slightly disappointing data in H2. This may lead to a reversal in the performance of cyclicals and value stocks.

• Valuation and Returns: Valuation metrics are not strong predictors of short-term returns. The team argues that valuations play a minor role in tactical decisions. However, combining valuations with momentum can help in asset allocation.

• Multi-Asset Performance: Multi-asset portfolios have seen widespread gains. Gold and Japanese equities were the only areas of weakness. The team continues to be overweight equities over sovereign bonds, with a preference for EUR credit and UK large caps.

Key Information

• Breakeven Trends: 5Y breakevens are expected to decline by another 45bp over the next six months. Lower breakevens are tightly correlated with cyclical asset class performance.

• Eurozone Equities: The team is underweight Eurozone equities due to the belief that the relative performance is driven by FX and global rotation, not macro momentum. They prefer FX exposure and more domestically focused equities such as small caps and European real estate.

• Valuation Metrics: Record highs in equities do not signal an imminent sell-off. Valuations are less sensitive to macro data surprises in recent years, and their predictive power for short-term returns is limited.

• Asset Class Correlations: Cross-asset correlations have fallen, with the RORO index declining. The correlation between EUR core rates and EUR HY credit has increased, possibly due to ECB QE.

• VAMOS Scores: VAMOS scores indicate a continued preference for EM and DM equities over fixed income. Commodities have seen a deterioration in scores for the first time in over six months.

Asset Class Views

• Equities: Overweight DM equities, particularly EUR and UK large caps. Underweight EM equities.
• Fixed Income: Overweight IG and HY credit, with a preference for EUR over USD. Underweight 7-10Y US Treasuries.
• Commodities: Underweight energy and base metals, with a risk of correction.

Conclusion

The team believes that the current market environment is more aligned with a "goldilocks" scenario, where growth expectations are high but unlikely to exceed. They advocate for a shift away from value and cyclicals, and a focus on carry assets and FX exposure for the Eurozone. Valuations are not the primary driver for tactical decisions, and the team remains focused on macroeconomic trends and momentum indicators.