Welcome to the August edition of “Market Perspectives”, the monthly investment strategy update from Barclays Private Bank, which is also available to download as a PDF [PDF, 503KB].
Despite US equities hitting an all-time high in July, we will be keeping our end-year forecast at 3000 for the S&P 500. While there may be an urge to reduce risk after the strong performance by equities, accommodative central bank policy looks set to support equity valuations for some time yet.
Indeed, risk assets typically outperform safer ones late in the cycle. In the current late-cycle environment, equities and emerging markets debt look set to outperform. That said, security selection and having active strategies will be key.
Major central banks’ increasingly dovish tone has triggered record flows into most parts of the bond market, resulting in depressed rates and spreads. As we head deeper into the cycle, and with ever higher levels of leverage, a diversified and selective approach to bond investing is key.
At a time when investors are keen to boost income, opportunities in emerging markets debt may offer one possible solution. In doing so, research shows that environmental, social and governance issues can add value to security selection and improve portfolio performance.
The gold price has bounced by close to 11% this year, as geopolitical tensions intensify and rate-cut expectations grow. Rather than looking to make investment gains from holding gold, we believe the yellow metal’s key attribute for investors is as a diversification tool.
“Safe” assets and risk assets have been positively correlated this year, as good news is seen as bad by financial markets. Continuously improving growth is set to return risk assets to the normal state of affairs, where good news is seen as good, perhaps later this year.
Jean-Damien Marie and Andre Portelli
Co-heads of Private Bank Investments
To download the full pdf, click here.