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What would ‘deglobalisation’ mean for asset allocation?

Globalisation has probably peaked and could be partly reversed as a result of technological change and protectionist policies. This would have significant implications for asset markets, which have generally benefitted from increased economic and financial integration over recent decades. In most scenarios, we think that asset returns would be lower over the next decade compared to the previous three.
Jonas Goltermann Senior Markets Economist
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Asset Allocation Update

Yield curve positioning after peak inflation

Although Treasury yields have dropped back in recent weeks amid signs that inflation has peaked, we don’t think it makes sense to extend duration. Of course, the longer a bond’s remaining life, the greater the sensitivity of its price to a change in its yield. So, those with distant maturities would tend to deliver better returns if yields fell further alongside inflation, even if the curve bull steepened a bit. But we suspect there will be a considerable lag between peaks in inflation and yields, as there was in the early 1980s.

24 May 2022

Asset Allocation Update

On the relative prospects for US equity REITs

We expect US equity REITs to remain under pressure between now and the middle of next year, given our view of the US stock and bond markets. Nonetheless, we doubt they will underperform US equities substantially given their relative valuations – we see no clear evidence that they are in more of a bubble; the overall outlook for the property markets in which they invest; and their apparently solid fundamentals.

17 May 2022

Asset Allocation Outlook

Asset allocation after inflation has peaked

Although we suspect that inflation in the US has now peaked, we don’t think that this will prevent either long-dated Treasury yields from rising again or the stock market there from coming under renewed pressure until the middle of next year. Indeed, we expect most “safe” and “risky” assets to fare poorly between now and then. This reflects a view that their fortunes won’t turn around decisively until shortly before the Fed stops tightening policy in summer 2023, even if the central bank engineers a “soft landing” for the economy in the meantime. Markets Drop-In (11th May, 10:00 EDT/15:00 BST): We’re discussing our Q2 Outlook reports and what they say about the potential performance of bonds, equities and FX rates as inflation peaks in a special 20-minute briefing on Wednesday. Register now.

10 May 2022

More from Jonas Goltermann

FX Markets Weekly Wrap

Dollar continues to march higher ahead of October payrolls

In another volatile week, the US dollar continued to appreciate against most other currencies, reaching its strongest level, in aggregate, since last November. In part, the greenback’s rally may have been driven by month- and quarter-end flows, and it has fallen back over the past couple of days. But the underlying drivers underpinning the recent dollar rally – the FOMC’s hawkish shift, and ongoing uncertainty around China’s economy and the strength of the global recovery – continue to point to a stronger dollar, in our view.

1 October 2021

FX Markets Update

Slowing global growth may continue to help the US dollar

We think that the ongoing slowdown in global economic growth points to continued dollar strength, which suggests to us that there is significant upside risk to our already-bullish dollar forecast.

1 October 2021

CE Spotlight

What would an era of higher inflation mean for currencies?

We think that a return to a regime of higher and less stable inflation in many major economies would result in a rise in exchange rate volatility and, over time, the depreciation of the currencies of those countries which experience higher inflation.

30 September 2021
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