Investment Outlook (Q3/2017)

The Investment Outlook for the third quarter of 2017 has been published.

“Denial ain’t just a river in Egypt.”
Mark Twain

Macro Environment

Inflation pressure in developed markets subsides for the time being as oil prices fall
European recovery maintains momentum – Election results in France bolster confidence
US sentiment & confidence is well ahead of hard economic data
Emerging markets growth remains robust

Risks for equity markets increase as hard data fails to catch up with overly optimistic sentiment data, mainly in the US
Increased volatility across asset classes and regions ahead
Fed still on track to tighten further – balance sheet adjustments will become market focus
ECB and BoE continue to change wording to prepare markets for an exit of their loose monetary stance
Productivity growth continues to be located in emerging markets rather than in developed economies

Reducing risk further – lowering the overall weight of the return portion to neutral
Equities over Sovereign Bonds
Emerging over Developed Equities
High Yield, EMD and Investment Grade Credit over Sovereign Bonds
TIPS as an (unexpected) inflation hedge

Global trade war initiated by erratic and extreme protectionist measures by the Trump administration
Substantial
growth slowdown in China puts further pressure on commodities and
export oriented countries predominantly in Asia but also elsewhere
Lower
than expected growth in the US, coupled with tax reductions and
substantially increased spending lead to more than expected rate hikes
in the US and a possible recession within the next 18 months
Middle
east conflict(s) in Syria, Qatar etc. escalate further and send oil
prices sharply higher – leading to substantially higher inflation in the
US, but also in the Eurozone and in the UK
Tensions between the US and North Korea increase and escalate further to send shock waves throughout financial markets

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