MACROECONOMIC VIEWS

·         Global growth converging towards trend

o   slowdown to persist in 2020

o   US growth should outperform Europe and Japan

·         Central bank policy to remain easy

o   room for further easing looks limited in Europe and Japan

o   more scope in the US and China if needed

·         Fiscal policy could be a game changer

o   US and Chinese policies are already expansionary

o   hurdles for European fiscal stimulus are high

KEY THEMES & RISKS

·         ‘Fragile goldilocks’ holds

o   stabilising data

o   loose central bank policy

o   short-term de-globalisation dynamics supporting risky assets

·         Beware the risks

o   after a strong 2019, our base case is vulnerable to a more entrenched ‘synchronised slowdown’ or a sustained ‘reflation’ environment

·         Fixed income is most at risk

o   fixed income markets most at risk from sustained move to reflation

Asset allocation

·         Modus operandi: nimble & diversifying

o   strategic risk/reward is unattractive

o   our base case is also vulnerable to tail risks/end-cycle dynamics

o   we see merit in a nimble approach and in building robust portfolios/diversifying

·         Overweight equities

o   in the latest dip we added overweight positions in equities again

·         Underweight core EMU duration

o   we have reduced our short exposure given yield moves

o   risks from reflation remain large for rates

·         Search for yield

o   we still believe in searching for yield

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