Investment Views

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June 2019

Here we summarise our Investment Committee's immediate outlook for the primary asset classes and major equity markets.

Investment Views for Jun 2019

  • Positive
  • Neutral
  • Negative
Asset Class Current View Outlook

After a reasonably strong Q1, global growth has slowed significantly and survey data points to further deterioration. Global manufacturing is weak, business confidence has softened, and world trade volumes are poor. Slowing jobs growth and flat wage growth could also limit consumer confidence. However, lower energy prices should act as a drag on headline inflation, and with central banks now adopting a more dovish tone, equities remain our favoured asset class. We fully expect episodic bouts of volatility reflecting trade and geopolitical tensions.

Fixed Interest

Corporate bond yields have fallen, but not as much as ‘risk-free’ sovereign bond yields. The anticipation of softer monetary policy, reflecting fears over trade tensions and weakening economic growth, provides support for some government bond markets, especially the US, as a ‘safe-haven’. However, with some $12 trillion of global bonds currently offer a ‘negative yield’ a highly selective approach is required to eke out value and a decent return, whilst avoiding too much risk.


UK commercial property returns look set to weaken. Continued Brexit uncertainty and weak UK economic growth is expected to defer the rise of interest rates and this is likely to contain rental yields. A no-deal Brexit is likely to cause capital values to decline, albeit limited. Elsewhere, there is increasing concern about a possible ‘asset bubble’ as surplus liquidity chases limited supply. As such, a more cautious approach is warranted.


Industrial commodities – the breakdown of US-China trade talks in early May caused many metal prices to plunge. Even if a trade deal is struck, we expect prices of most industrial and energy commodities to remain subdued on slower global growth.

Oil – prices fell about 15% in May and in the short-term are expected to hover about current levels. Although supply constraints present an upside risk, sluggish global economic growth is expected to weigh on demand.

Gold – as geopolitical tensions rise (especially in the Middle East) demand for the commodity’s safe-haven qualities is expected to grow. A softer dollar, given the expectation of a decrease in US interest rates, should also be supportive.

Absolute return – offers the potential to dampen volatility and provide some downside protection, but returns are often moderate at best.


With the BoE expecting zero economic growth in the UK in Q2, and with inflation having fallen to its target of 2% in May, the pressure to raise rates has eased. Given that both the Fed and the ECB are now preparing to move to a softening of rates, together with the ongoing Brexit uncertainty, it is increasingly unlikely that UK rates will rise any time soon. Consequently, cash currently serves only as a diversifier, helping to reduce portfolio risk by dampening volatility.

Equity Region Current View Outlook

The uptick in political uncertainty following PM Theresa May’s resignation combined with the ongoing Brexit uncertainty is expected to result in softer economic growth in 2019 and spill over into 2020. Sterling’s relative value is likely to dictate the market direction until the ‘fog’ of Brexit clears, especially given the current constituents of the FTSE 100 and the bias to overseas revenues.


The US economy is expected to slow further in the second half of the year, especially as the costs of escalating tariffs begin to mount, although it is expected to remain relatively buoyant compared with other advanced economies. All eyes are on the Fed with now heightened expectation of rate cuts, which will be supportive. A soft-landing is more likely than a recession, but with equity valuations near historical averages we maintain our neutral stance.


Economic growth is likely to remain sluggish with exports, household consumption and investment remaining subdued. Consequently, core inflation could remain well below the ECB’s target prompting the bank to re-start QE. Global trade issues, Brexit, continued austerity, and Italy’s indebtedness and clash with the EU over its public finances are likely to remain as headwinds. Despite a buoyant equity market so far in 2019 we remain relatively downbeat on the outlook.


The manufacturing sector output may have improved in Q2 and business confidence seems to have held up better than some advanced economies. Nevertheless, the general economic outlook suggests further deterioration and yet the government is expected to proceed with the sales tax hike scheduled for 01 October. Inflation is expected to remain subdued and so we expect the Bank of Japan to keep policy loose for the foreseeable future. Potential headwinds are a breakdown in the trade negotiations and a stronger yen (reflecting its safe-haven qualities).

Asia Pacific and Emerging Markets

Economic growth across emerging Asia economies is expected to be weak this year. Slower global growth means falling exports and the ongoing downturn in the global electronics sector is expected to act as a further headwind. Consequently, some loosening of both fiscal and monetary policy is expected. The Chinese authorities are expected to continue to provide support for the economy, but, with concerns about financial risks and the escalation in the trade war with the US, growth is more likely to stabilise rather than rebound.

Risk warning: Investors should be aware that past performance of investments is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them may fall as well as rise. The content of this bulletin is for general information and reflects the general market view of Parallel Investment Management Ltd. - it should not be interpreted as recommendations or advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.

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