CIO Views: Credit default swaps, the Fed’s challenge and China’s new strategy
Asset Class Summary Views
Views expressed reflect CIO team expectations on asset class returns and risks. Traffic lights indicate expected return over a three-to-six-month period relative to long-term observed trends.
CIO team opinions draw on AXA IM investment team views and are not intended as asset allocation advice.
Rates |
Yields remain in tight ranges, curve steepening still likely | |
|---|---|---|
US Treasuries |
Interest rate cuts still expected, foreign demand holding up | |
Euro – Core Govt. |
Lower inflation is supportive for European Central Bank easing interest rates | |
Euro – Govt Spread |
Still offering potentially attractive returns | |
UK Gilts |
Cheap valuations but looking for better news on fiscal policy | |
JGBs |
Higher yields seem likely given current inflation and fiscal risks | |
Inflation |
Continue to like short-duration inflation-linked bonds |
Credit |
Narrow spreads and long positions create potential risks | |
|---|---|---|
USD Investment Grade |
Positive fundamentals and momentum but valuations are rich | |
Euro Investment Grade |
Demand continues to be strong but excess returns more modest | |
GBP Investment Grade |
Potentially attractive returns for sterling- based investors | |
USD High Yield |
Risks to cyclical sectors from global trade situation, with spreads tight | |
Euro High Yield |
US tariffs on European Union exports could impact some more leveraged names | |
EM Hard Currency |
Carry remains attractive but strong flows into local currency bonds |
Equities |
|
Earnings resilient despite macroeconomic uncertainties |
|---|---|---|
US |
Artificial intelligence-driven capital expenditure boom is sustaining large-cap earnings | |
Europe |
US tariffs and expected German demand boost create opposing forces | |
UK |
Market displays defensive qualities; domestic firms should benefit from continued rate cuts | |
Japan |
Artificial intelligence and robotics are supportive themes for Japan | |
China |
Technology and positive policy catalysts; broader earnings challenged by deflation | |
Investment Themes* |
Long-term positive on artificial intelligence and carbon transition strategies |
*AXA Investment Managers has identified several themes, supported by megatrends, that companies are tapping into which we believe are best placed to navigate the evolving global economy: Automation & Digitalisation, Consumer Trends & Longevity, the Energy Transition as well as Biodiversity & Natural Capital
Data source: Bloomberg
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