Market Returns
Chinese GDP growth may have picked up slightly in the first quarter, and growth numbers will likely continue to exceed expectations in the coming months. The market is overly bearish on China's earnings outlook, and may be on the verge of reassessment. Stay positive on H shares.
Some tentative signs of life in the global manufacturing data suggest that Treasury yields have some room to move higher in the near term.
We continue to recommend a cautious investment stance, staying at benchmark duration, as the recovery in risk assets looks more like a counter-trend rally than the start of a new bullish run.
We are sending you the Q2 <i>Global Investment Strategy Outlook</i>, which discusses the ten predictions we expect to drive global financial markets throughout the rest of the year.
Fed dovishness is weakening the U.S. dollar. As the ECB and BoJ move to the sidelines and the Fed remains reluctant to hike rates, the euro and Japanese yen should continue to recover versus the greenback.
Several tail risks appear less ominous compared to last month. Nonetheless, the earnings outlook has not improved and the FOMC will turn more hawkish ahead of the June meeting. Stay defensively positioned.
Risk assets are stuck in a range driven by the Fed feedback loop. But the current rally may continue for another quarter or two.
There are a number of warning signs that the global and EM equity bounce is unsustainable. The latest episode of housing recovery in China will prove temporary due to still-large imbalances. Overweight Indian stocks: the credit cycle in India is less vulnerable compared to other EMs. However, the outlook for Indian equities in absolute terms is not bullish.
The RMB has moderated considerably since mid-last year, which should lead to improved capacity utilization and easing PPI deflation. There is a strengthening case for an upswing in China's profit cycle, driven by falling interest rates and a weaker RMB, while investors are ill-prepared for any positive earnings surprises.
Renewed strength in the U.S. equity market sponsored by another round of global monetary easing has revived the debate about whether it is finally time to transition out of our <i>alpha</i>-generating defensive portfolio strategy. This <i>Special Report</i> examines the critical factors shaping this investment decision.