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Equity Strategy Team

Charles Cara
Head of Quantitative Strategy
Philip Isherwood
Global Sector Strategist
Richard Mylles
Political Analyst
Zahra Ward-Murphy
Global Equity Strategist

Equity Strategy Research

Equity Strategy Products: Absolute Strategy Weekly, Equity Strategy Quarterly, Trade Alerts.

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Investment Strategy Weekly Update - 27th April 2017
27 Apr 2017
: Ian Harnett, Michael Hessel, Dominic White, Raphael Olszyna-Marzys, Ben Blanchard, Chris Turner, Stefano Di Domizio, David McBain
Watch: Investment Strategy Weekly Update - 27th April 2017
Strategic Asset Allocation Quarterly - ASR’s Asset-Allocation Probabilities
25 Apr 2017
: Ian Harnett, David Bowers, Dorothee Deck

Top Convictions on a 12-Month View

• Equities could underperform bonds as the business cycle disappoints

• USD may be lower a year from now, hurt by adverse real-yield differentials

Our quarterly Strategic Asset Allocation report provides a summary of how ASR views the prospects for financial markets over the next 12 months. It expresses our ‘core’ calls in terms of probabilities. This allows the ASR view to be compared directly with the Consensus as tracked in ASR’s quarterly Multi-Asset Survey.   

On a 12-month view, we have become more worried about risk assets. Because of the tightening in US and Chinese monetary policy, we believe that the global business cycle will be weaker, not stronger, a year from now. We think that the improvement in global inventory-shipment conditions will soon be over, reducing the scope for pricing power and corporate earnings growth – and exposing the equity markets’ demanding valuations. This view contrasts with ASR’s Multi-Asset Survey which is anticipating a sustained global reflation trade.

Against this backdrop, we think that the pressure on US interest rates could be less than the market expects. We think US 10yr yields will remain range-bound, and are unlikely to breach the critical 3% level over the next 12 months (unless the ECB tapers aggressively). We worry that equities may underperform bonds should investors start to see weaker earnings growth and lose confidence in the current rich valuations. We also question how long the global Equity Risk Premium can resist upward pressure from the persistently high levels of global Policy Uncertainty. We believe investors will have to prepare themselves for higher equity volatility over the next 12 months.

Finally, we believe the USD could disappoint if the ECB tapers on the back of rising core eurozone inflation, resulting in a narrowing of real-yield differentials. 

Investment Strategy Weekly Update - 20th April 2017
20 Apr 2017
: Raphael Olszyna-Marzys, Michael Hessel, Ben Blanchard, Dominic White, Philip Isherwood, Charles Cara, Zahra Ward-Murphy, Chris Turner, David McBain, Stefano Di Domizio
Watch: Investment Strategy Weekly Update - 20th April 2017
DESKNOTE : UK snap election makes a hard Brexit less likely
19 Apr 2017
: Richard Mylles

UK snap election expected on 8th June

The key points:-
•     The governing Conservatives are likely to increase their majority at the expense of Labour (one estimate by psephologist Michael Thrasher suggested that current polls replicated at a general election would give the Conservatives a 140-seat majority)
•     The Liberal Democrats could enjoy a revival in areas which voted Remain in last year’s Brexit referendum
•     This could have the effect of creating an even more eurosceptic Conservative parliamentary party, as Tory MPs in Remain-majority constituencies lose their seats to the Lib Dems and a large new intake of pro-Leave MPs enter Parliament courtesy of Labour collapse in the majority-Leave North of England
•     However, there is also a significant likelihood that, if Theresa May is able to enlarge her majority (currently just 17 seats), she will strengthen her personal authority, reduce the leverage of the hardcore eurosceptics in her party (about 60 MPs) and potentially increase the chances of either a softer Brexit and/or a lengthy transitional period in which the UK’s current membership terms are effectively extended beyond March 2019
•     The election will also reset the electoral clock, easing the pressure to extricate the UK from the EU by June 2020 (the previous date of the next scheduled election), extending that notional deadline to June 2022, and potentially providing much-needed negotiating time to agree the post-Brexit relationship

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