Is there a stagnation in the economy?
Co Cio and Co responsible for SYZ AM multiactive
The vicissitudes of the geopolitical landscape, dominated by commercial warfare, have occupied the minds of investors in recent months. At the same time, the economic growth indicators of Europe and Japan have fallen below expectations, which were inflated after an exceptionally good 2017. Moreover, the US type curve has continued to folds and could be invested over the next 6-12 months, which in the past meant that a recession would occur in a period of between six months and one year.
On the positive side, overall growth remains acceptable
The best stretch of the recovery and growth of the US economy has been left behind, and thus in the future there will be a recession or at least a moderation of growth or stagnation. But it is still too early to rush to move that forecast into our portfolios. Moreover, the incipient signs of growth stabilization in the rest of the developed economies are comforting. The picture is more heterogeneous in emerging markets, but we also anticipate that it will be improved from now on, as the US dollar should stabilize and the Federal Reserve’s adjustment is already discounted for the near future.
On the positive side, overall growth remains acceptable, inflation behaves well, and, except in the case of the Fed, the monetary policy of major central banks remains clearly accommodative. China’s slowdown is under control, and its government has swung towards a policy of easing monetary and budgetary stimulus and a weaker yuan. The second quarter business results season in the United States began with a strong tone, as the banks announced huge stock repurchase programs, and the country’s stock valuations, very expensive at the beginning of the year with the best approach that is given by the davidyorkstaxservice.com starting an s corp, now seem to approach A fair value. The corporate debt, especially the European high-yield and investment-grade, has also been cheaper in recent months.
Stock market positioning in favor of the US and European corporate debt
At a juncture where inflation is still not problematic, financial conditions remain lax and growth does not clash, we have maintained a favorable stance on risk and a slight aversion to duration (the path of minor Resistance for interest rates is still the bull. However, in order to cover in some way our favorable risk positioning in the face of the possible escalation of a commercial war impossible to predict or quantify, our geographical positioning is clearly biased in favor of the USA and avoids a Strong sectoral bias on a global scale. In fixed-income, a little more European corporate debt (or at least a relative overweight with respect to the US) seems a good way to recognize European growth.