INVESTMENT STRATEGY – PRIVATE BANKING, 3RD QUARTER 2015
Greece-induced jitters will eventually recede, but only to give way to another episode of volatility, caused by early signs of a change in inflation regime.
AT A GLANCE
- Greece-induced jitters will eventually recede, but only to give way to another episode of volatility, caused by early signs of a change in inflation regime.
- The Federal Reserve (Fed) is set to start lifting rates this autumn: watch out for market concerns that it may be falling behind the curve and that bond market liquidity (particularly in high beta segments) could break down.
- In the Eurozone, deflation has given way to some (encouraging) demand-driven inflation, although still far from levels that would require the European Central Bank (ECB) to reverse course. We maintain our European equity overweight.
- The economic situation is still too fragile for the Bank of Japan (BoJ) to contemplate “tapering”. Further easing, combined with pension fund diversification and still solid corporate earnings, should continue to support Japanese equities.
- The ongoing slowdown in emerging growth is largely driven by supply- (rather than demand-) side issues. Many countries, particularly in Asia, will be able to cope with a tighter Fed, notably because their currencies are no longer pegged to the US dollar, although countries with higher external debt are more vulnerable.