Foreign exchange – carry still matters

By Romain Cabasson – Senior Portfolio Manager; Multi-Assets – Core Investments

Key points

  • Cautious optimism on global growth may finally be the catalyst for some US dollar weakness in 2020.
  • However, this may not benefit the euro, as carry still matters a lot to investors.
  • We believe the Canadian dollar is a better ‘upside’ choice than the Australian dollar, and the Japanese yen a better safe-haven than the Swiss franc.

Rates – Modest performance likely in 2020

By Alessandro Tentori - AXA IM Italy CIO and Rates Strategist Research – Core Investments

Key points

  • Monetary policy has amplified an already strong “grab-for-yield” environment. As a result, performance has been solid across fixed income.
  • The focus is shifting away from conventional policy tools, as central banks are in the process of re-thinking their strategy and their instrument mix.
  • Looking ahead, elements of risk in fixed income such as low volatility, negative-term premia, liquidity risk, are likely to affect performance in the rates markets.

Credit – endless summer amid growth lowlands

By Gregory Venizelos, Credit Strategist, Research – Core Investments

Key points

  • It has been a year of strong returns for credit, stellar even for long duration markets.
  • The duration pendulum should swing in favour of high yield in 2020, barring a bad downturn in growth.
  • Neither the large BBB rated cohort nor covenant-lite loans are likely to upend credit markets in 2020.

A decade into the cycle – it’s still hard to be bearish

By Varun Ghotgalkar, Equity Strategist, Research – Core Investments

Key points

  • Our leading earnings indicators suggest that earnings growth momentum is starting to trough and is likely to pick up in the second half of 2020.
  • Equity valuations are close to long term averages and still provide relative value against sovereign bond and credit markets compared to historical standards.
  • We keep a constructive stance on equities moving into 2020, with a bias towards undervalued cyclical plays in our allocation.

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