Marketexpress
How long will the cyclical upturn last?
We are at the beginning of a cyclical upturn. The crucial question is of course how long it will last. The answer depends on the nature of the shocks that will hit the system as well as its size. One of the possible shocks? A Greek exit.
Don’t neglect the emerging market headwinds
Emerging markets are performing very well in 2012. Inflows are strong, currencies are appreciating and emerging market equities are outperforming their developed market counterparts. The strong performance has further to run, but we must not forget that some serious headwinds are lying ahead.
US housing is coming out of a coma
Risky asset support is building. For our asset allocation stance this has resulted in a small overweight in Global Real Estate. Since the beginning of the year we have been modestly overweight equities.
Equity uptrend has further to run
The start of the year has been positive for risky assets such as equities. Especially emerging markets and the developed Asian markets (ex Japan) stand out. Sector-wise, cyclical sectors are the clear outperformers. Are we just facing a short-lived New Year’s rally or is this the beginning of a prolonged cyclical equity uptrend?
Commodities upgraded to a small overweight
As already known, in the first week of 2012 we took more risk in our tactical asset allocation by upgrading equities (see Marketexpress of 9 January 2012) and commodities to small overweight positions. In this Marketexpress we describe in rough outline our views on commodities within a global context. The reasons why we decided to take somewhat more risk are largely determined by somewhat positive changes in the situation in the Eurozone as well as in the global cycle.
Euro might depreciate a bit more
On 13 January S&P downgraded a number of countries such as France and Austria (from AAA to AA+). In December the downgraded were already announced. For 2012 the outlook for currency markets continues to be uncertain.
Looking for opportunities in a dynamic environment
On 3 January 2012 we decided to take a small overweight in equities and commodities. The global economy improved, not only in the US, but also in the emerging world and in Germany. On balance the European economy stabilised.
Taking a glass half full perspective
We maintain our neutral positioning in equities versus fixed income after the European summit. In our broad asset allocation context we are also rather neutral. Sector wise, we became a bit more positive for financials (now neutral).
Senior Investment Specialist Ad van Tiggelen about Asset Allocation in October.