MARKET COMPASS
DECEMBER 2018

Edited by the Macro & Market Research Team.                                 The team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

  • Weaker macro data and persistent political risks have kept risk aversion high, especially at the expense of equity and corporate bonds.

  • Market volatility will not stop the Fed and the European Central Bank (ECB) in their plans to reduce monetary stimulus. However, the tone of communication may soften, reassuring investors amid several political risks (trade war, Brexit, Italian budget) they still face before the end of the year.

  • However, domestic demand in the US and the Euro Area remains strong, and Emerging Markets are proving overall resilient. Therefore, while risks have risen, a deeper global slowdown is not around the corner.

  • Market correction looks exaggerated and can provide investment opportunities. We then extend a tilt towards credit and keep a small overweight in equities.

LA BUSSOLA DEI MERCATI DICEMBRE 2018

RELATED INSIGHTS

EQUITIES: POSITIVE RETURNS AHEAD DESPITE CHALLENGES
Equity markets have rebounded from a historical slump in Q1, with US markets even posting fresh record highs. We acknowledge the risen risks of setbacks amid loftier valuations, elevated political risks (US elections, Brexit and US-China frictions) and Covid uncertainties into autumn.
TAKING MONETARY POLICY TO YET ANOTHER LEVEL
The presentation of the new Long Term goal and strategy on August 27 marks a deep shift in the Fed’s monetary policy. The new way inflation and the labour market will affect monetary policy will result in a marked downward bias to interest rates.