Investment outlook strategy
Foreign Exchange – Growth expectations to drive currencies in 2021
By Romain Cabasson, Senior Portfolio Manager; Multi-Assets – Core Investments
- The elephant in the room is the US dollar (USD), which seems overvalued against most currencies.
- Lower uncertainty and a more constructive outlook turn us towards more cyclical currencies.
- Markets are set to reward currencies of countries and regions that should recover faster in 2021.
Rates – modest performance likely in 2021
By Alessandro Tentori, AXA IM Italy CIO and Rates Strategist Research – Core Investments
- Central banks are likely to look beyond temporary inflationary spells, but there is always uncertainty.
- Macro expectations to affect the longer end of the curve, driving bear steepening or bull flattening.
- Term premia can be viewed as a measure of investor complacency and as such a source of positioning risk.
Credit – hard to imagine anything but a calmer 2021
By Gregory Venizelos, Credit Strategist, Research – Core Investments
- An unprecedented shock has been met by a record policy response. This may well need to continue.
- Excess borrowing has led to strong debt growth from already high levels – a major concern going forward.
- The default cycle has slowed but its outlook remains clouded by macro/pandemic uncertainty
Equities - Show me what you got
By Varun Ghotgalkar, Equity Strategist, Research – Core Investments
- As a rollercoaster year draws to a close, equities are in the green with sentiment indicators normalising. Whether the style rotation runs beyond recent catalysts is a key debate for the year ahead.
- Expectations for earnings growth are strong, implying we will cross the 2019 high water mark. Equities still appear attractive on a relative-value basis with the equity risk premium having room to compress.
- We maintain our constructive stance moving into 2021 given recovering activity, supportive policy, subdued positioning and an ultra-low hurdle rate in other assets that should support the asset class.
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