The first four months of the year were very positive for risky assets as investors focused on the positive impacts resulting from the U.S. upcoming pro-growth policies.
Global equities posted a gain of +7.9% during the first four months of the year, with Emerging Markets leading the way on Chinese and commodities’ stabilization.
Europe, plagued by continuing banking problems and political uncertainty with the rise of populism, has been able to post stronger than expected economic numbers. The populist wave in Europe seems to be receding but we are cautious on Italy which is still in a precarious economic and political situation.
Emerging Markets have finally turned the corner with corporate profits rebounding and commodities stabilizing. Emerging equities, but also Emerging Debt Bonds offer selectively attractive investment opportunities in local currency as the USD strength has started to fade.
The global economic landscape has been very conducive for High Yield bonds. However, current tight credit spreads make the risk-reward less appealing. Corporate loans benefit from a strong economic backdrop and the “adjustable rate attribute” is in favor of this asset class when rates increase.
US Government bonds lagged performance-wise as rising rates were a significant headwind. The outlook remains uninspiring.
Gold has been recovering strongly on a YTD-basis even against rising interest rates, providing a hedge against potential inflation pressures.