Playing Economic Acceleration
Global growth and inflation acceleration is positive for risk assets and equities, in particular, are expected to outperform bonds in the next few months. In equities, we keep a selective approach favouring markets where we see stronger earnings growth. Selection is paramount also in fixed income, where we prefer short duration bonds and inflation linkers.With higher expectations, there is more room for disappointment. Trump’s fiscal reforms could be delayed, his protectionist policies could damage the global economy. We therefore like riding the reflationary wave with a strong focus on hedging (gold and US dollar).
Geopolitics and Investing: the Normality of the Unexpected
For investors the three main geopolitical trends to watch in 2017 are: how the Trump presidency operates and affects the global economy, what the rise in populism means for Europe’s economies and Oil price dynamics. In our opinion, these trends will all affect the world economy, international relations over the medium term and financial markets. In this environment investors should focus on building portfolios resilient to fat tail events exploiting tactical and selection opportunities that can arise from geopolitics.
We believe that diversification across multiple strategies both top-down (macro and satellite) and bottom up (selection strategies), combined with hedging strategies to limit the downside in case of tail risk, are key ingredients to building portfolios that are resilient in a world where the unexpected is becoming the new normality.