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Multi-Asset Team

Chris Turner
Head of Multi-Asset Strategy
Dorothee Deck
Multi-Asset Strategist
David McBain
Head of Technical Strategy
Stefano Di Domizio
Head of Fixed Income Strategy

Multi-Asset Research

Multi-Asset Products: Absolute Strategy Weekly, Absolute Essentials, Multi-Asset Strategy Monthly, Sentix Survey Essentials, Trade Alerts.

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ASR Sentix Survey Analysis - 27th February 2017
27 Feb 2017
: David McBain
Investment Strategy Weekly Update - 23rd February 2017
23 Feb 2017
: David Bowers, Zahra Ward-Murphy, Philip Isherwood, Charles Cara, Dominic White, Michael Hessel, Raphael Olszyna-Marzys, Stefano Di Domizio, Chris Turner, David McBain

Please see below for full contents

Strategic Asset Allocation: Tripwires for Regime Change
It is too early to say whether the Trump Administration represents a regime change. We are watching four key tripwires: (1) will 10yr US Treasury yields rise above 3%; (2)  is policy changing beyond America so that Global Equity Risk Premia break out of their trading ranges; (3) is there evidence of institutional change; and (4) can we identify signs of microeconomic change that support the idea of a macro regime shift?  Regime change seldom comes mid-cycle and may only become apparent coming out of the next recession.
 PODCAST: Click to hear David’s accompanying podcast

Guest article: A Letter From America, by Gerald D. Cohen: What is the Potential for US Potential Growth?
In the first of six articles written especially for ASR, Gerald Cohen, former Deputy Assistant Secretary for Macroeconomic Analysis at the U.S. Department of Treasury, examines the credibility of the Trump Administration’s claim that GDP will be 17% higher than currently forecast by the Congressional Budget Office (CBO) in 10 years’ time.

Economics, with guest article by Heinz Schulte: Stuck in the middle: EU
Political risk appears to be undermining investors’ confidence in the eurozone recovery. This week’s Economics Weekly looks at two aspects of this. First, in a guest article, Heinz Schulte examines how Germany might respond to the duel threats of President Trump and Marine Le Pen. Second, Michael has looked at the threat deriving from the Dutch election on March 15, where a political standstill could derail the Greek bailout negotiations.

Equity Strategy: French Politics Risk to Region More than Market
The risk that France leaves the Eurozone has implications for the region as a whole and is more a reason to underweight Eurozone vs Global Equities than France vs Eurozone. Within the Eurozone, based largely on our preference for Quality, we recommend being Overweight the Core markets of Germany and Netherlands vs the Periphery markets of Italy and Spain, but stay neutral on France.
 PODCAST: Click to hear Zahra’s accompanying podcast

Multi-Asset: Exploiting the Eurozone binary outlook
Euro periphery yield curve flatteners look a compelling way to hedge the elevated political risk without giving up on the robust growth implied by Eurozone PMIs. Also featuring analysis on 10-year DSLs, BTP/OAT yield spread and SEK/EUR 5y swaps.
 PODCAST: Click to hear Stefano’s accompanying podcast

• Tripwires for Regime Change, by David Bowers

• What is the Potential for US Potential Growth? by Gerald Cohen

• The shifting of Teutonic plates, by Heinz Schulte

• Dutch courage needed as Greek tensions grow, by Michael Hessel

• Absolute News: Global challenges to the EU

• Absolute Surprise: Domestic demand driving German growth

• Key Views & Forecasts

• Regional, Sector and Factor Investment Recommendations

• France is a Eurozone, not just a local, problem, by Zahra Ward-Murphy

• European bond ideas, by Stefano Di Domizio

• Sentiment extremes and markets on the move

• Multi-Asset open trade recommendations

Watch: Investment Strategy Weekly Update - 23rd February 2017
Absolute Essentials: Relative opportunities in Vol, Equities and Cross-asset
22 Feb 2017
: David McBain

VOL: Gold volatility oversold vs G7 FX vol – we look for relative pick-up (P3)

EQUITIES: Optimism stretched on US, EZ, EM and HSCEIvs KOSPI (P3, 5-7)

OIL: Low volatility and extended net long positions a risk for Crude (P4/14)

Relative sentiment opportunities in Vol, Equities and Cross-asset

Low levels of volatility are a feature in commodities as well as equities. Crude vol has reached oversold SBI levels, against a backdrop of extended net long positioning. Specs look ill-prepared if a pick-up in vol coincides with a leg down in Crude prices. Gold vol also looks oversold on sentiment grounds in absolute and relative terms. Sub-3 Gold vol/G7 FX vol SBIs have historically been followed by a rise in relative vol over the next 30D on 74% of occasions, by an average 14%. We see risk that Crude and Gold vol will rise from here.

In equities, Hang Seng entered the week in stretched optimism territory (see p7). Hang Seng China Enterprises index has also reached stretched optimism territory versus the KOSPI. SBI levels of over 96 have historically been followed by a fall in HSCEI vs. KOSPI over the next 30 days on 78% of occasions, by an average 4.6%. Risk of a near-term reversal in HSCEI versus KOSPI. See p3 for charts.

Chart of the Week. The recent setback in Dow Jones Transport versus DJ  Industrials has opened a gap with the 6 month % change of Industrial Metals versus Precious Metals. However, this relative gap may soon begin to close, with their relative SBI dropping below 8. Sub-8 SBI levels have historically been followed by DJ Transport/Industrials outperformance versus Industrial/Precious Metals over the next 30 days on 84% of occasions, by an average 6%. 

Multi-Asset Trade Alert - Hedging Euro political risk in government bonds
21 Feb 2017
: Stefano Di Domizio

The Eurozone outlook is looking increasingly binary, stuck between elevated political risks and a strengthening economic recovery. We argue yield curve flattening positions on Euro peripheral bonds offer a compelling way to hedge Eurozone tail risks without giving up on the growth story

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