Key Messages
1. End of a volatile first half reminds of the need to fortifyportfolios.
Most equity investors are unlikely to look back on the first half of 2018with great fondness. First half returns across all major asset classes,with the exception of US large-cap growth and small-cap equities, wereeither low-single-digits or negative. The ratio of returns to volatility forglobal equities was just 0.15. As we look ahead to the second half webelieve it is important for investors to stay invested, but also to prepare forcontinued volatility. This includes looking to alternatives (including impact investments), hedging equities, improving credit quality, diversifying, and investing in longer term themes.
Märkte bewegen Aktien, Zinsen, Politik. Und Menschen. Deshalb präsentieren wir dir hier die bedeutendsten Analysen und Thesen von Top-Ökonomen - gebündelt und übersichtlich. Führende Volkswirte und Unternehmensstrategen gehen den wichtigen wirtschaftlichen Entwicklungen clever und zuweilen kontrovers auf den Grund.
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Key Messages
1. End of a volatile first half reminds of the need to fortify
portfolios.
Most equity investors are unlikely to look back on the first half of 2018
with great fondness. First half returns across all major asset classes,
with the exception of US large-cap growth and small-cap equities, were
either low-single-digits or negative. The ratio of returns to volatility for
global equities was just 0.15. As we look ahead to the second half we
believe it is important for investors to stay invested, but also to prepare for
continued volatility. This includes looking to alternatives (including impact investments), hedging equities, improving credit quality, diversifying, and investing in longer term themes.
Takeaway: We believe the strength of global growth should allow markets
to grind higher in the second half. But it’s a good time to reinforce
portfolios against higher volatility. Read more on preparing for choppier
markets in our report: Volatility is back. Are you prepared?
2. Flatter curve needn't signal a recession.
The gap between yields on US 2-year and those on 10-year government
bonds narrowed to just 30 basis points last week, the slimmest margin
since August 2007. Such yield-curve flattening is traditionally thought to
herald restrictive monetary policy and weaker growth ahead. But a flatter
curve isn't an inverted curve, and we don't see this as a cause for concern.
Since 1988, an inverted two-year/10-year yield curve has preceded the start
of US recessions by as few as 150 and as many as 750 days – making it a
poor predictor. And Fed policy is not yet restrictive and growth signals are
positive.
Takeaway: We do not expect the Fed to bring an end to the economic
upswing any time soon. Rate rises should remain gradual and we are
overweight the 10-year US Treasury.
2. Flatter curve needn't signal a recession.
The gap between yields on US 2-year and those on 10-year government
bonds narrowed to just 30 basis points last week, the slimmest margin
since August 2007. Such yield-curve flattening is traditionally thought to
herald restrictive monetary policy and weaker growth ahead. But a flatter
curve isn't an inverted curve, and we don't see this as a cause for concern.
Since 1988, an inverted two-year/10-year yield curve has preceded the start
of US recessions by as few as 150 and as many as 750 days – making it a
poor predictor. And Fed policy is not yet restrictive and growth signals are
positive.
Takeaway: We do not expect the Fed to bring an end to the economic
upswing any time soon. Rate rises should remain gradual and we are
overweight the 10-year US Treasury.
