Risky assets are being favoured globally and the momentum is likely to increase, despite the Eurozone political situation being volatile and investors fostering market nervousness, according to the recent Investment Strategy & Markets Insights March edition published by Societe Generale Private Banking (SGPB).
Titled ‘Stand firm as volatility may spike up’, the SGPB publication highlights that political developments in the Eurozone – especially in difficult markets such as Cyprus and Italy – are unlikely to derail the positive risky assets drive that is ongoing, even though a pause is on the cards.
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The Eurozone equities are the most ‘obvious victim’ of the poor crisis management in Cyprus, according to SGPB. "While we believe that in medium-term Euro equities may enjoy more upside, in the short-term the absence of catalysts may prevent Euro stocks to outperform", said SGPB.
However, investors keen on UK assets need to take more risk on the credit side now in order to enjoy yields above dividend yield.
US and Japanese markets are likely to continue to be lifted by strong macro readings and positive earnings prospects, reveals the Investment Strategy & Markets Insights March edition. The "very aggressive policy mix" in Japan has enabled a revival in growth, particularly through a much lower yen, and earnings growth has been consistently revised up.
In the emerging markets, growth still looks on track and Mexico and India have joining the "easing bandwagon", maybe soon to be followed by Korea, according to SGPB. At the other extreme, Brazil recently shifted course, signaling a "less loose" policy while China’s decision to rein in the property market fueled concern that a growth detrimental policy tightening could be underway.
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By GlobalDataEMEA markets continue to outperform other emerging markets both sovereign debt and corporate markets. However SGPB suggests that investors have a selective approach in the region as this market requires a bottom up approach as "fundamentals have deteriorated a bit recently".
The Investment Strategy & Markets Insights is put together by the economic research team at SGPB. The March issue was produced by the emerging markets team, equity and fixed income strategists, as well as the chief economist at SGPB.
