Investment View Q4 2017

Market Perspectives 02/10/2017

Despite rising geopolitical tensions around North Korea and political turmoil in Washington, the globally synchro-nized expansion still has legs. Inflation pressures, by contrast, will remain subdued. Even in the US, where the labor market is already tight, evidence of more visible price increases will become apparent only in 2018.
In this setting, major central banks – with the exception of the Bank of Japan – will continue to proceed gradually on their path towards monetary policy normalization.
While the looming decision by the ECB to taper its asset purchases in 2018 has already lifted European yields and triggered a rally in the euro, the pace of due rate increases in the US is still widely underpriced by markets.
We anticipate moderate upside pressures on yields to prevail, with a preference for euro area IG corporate bonds over government bonds. We see scope for further gains on European and Japanese equities, while the US dollar seems headed for a temporary recovery phase.
Southern European sovereign debt is likely to face some headwinds over the coming months on Catalan independ-ence ambitions and political uncertainties in Italy ahead of 2018 elections.

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