Market Compass
October 2019

Edited by the Macro & Market Research Team.
A team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

  • One fourth of Investment Grade (IG) bonds have now negative yields; this radically alters portfolio considerations. The threshold for switching away from risky assets is higher than it used to be.

  • A global recession is not our core scenario, but monetary and fiscal support are required. We assume none of the three major risks (Brexit, US/China trade war, Middle East tensions) will materialize in the worst way.

  • In the upside-down world of negative yields, IG Credit is a new safe haven, as shown by relative low IG yield volatility. Equities remain cheap relative to bonds, and the Fed will remain more supportive than what the latest dot plot shows.

  • As a consequence, we prefer longer dated IG bonds over Sovereigns. Our mildly pro-risk allocation foresees an underweight in short-dated EUR Govies and cash. With the USD near its peak, Emerging Markets’ equities and bonds offer selective opportunities.

MARKET COMPASS
OCTOBER 2019

RELATED INSIGHTS

GLOBAL VIEW – ENJOY SUMMER WHILE IT LASTS
As lockdowns have been lifted and global activity rebounded from the Q2 nadir, hopes of a strong recovery have helped risk assets advance further over July.
Generali Investments among preferred asset managers brands in Europe
Listen to the dedicated Podcast by Vincent Chaigneau, Head of Research, on our view on the economic recovery, new behaviours in the aftermath of the pandemic and the unique opportunities for a European fiscal and political integration.
PODCAST:
LIFE AFTER COVID -
THE LDI VIEW
Listen to the dedicated Podcast by Vincent Chaigneau, Head of Research, on our view on the economic recovery, new behaviours in the aftermath of the pandemic and the unique opportunities for a European fiscal and political integration.