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27.11.2019 4

Global Investment Views - December 2019

Published November 27, 2019

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Sentiment rebound favours rotation towards value

In recent weeks equities rallied along with bond yields as investors reacted to the prospect of a US-China ‘phase one deal’ and fading global recession fears. The value of negative yielding bonds continued to fall, from US$17 trillion over the summer to the current US$12.5 trillion. While equities were previously overshadowed by the excessive gloominess on the global economy and earnings, markets rebounded after corporate results in the US and Europe met or exceeded low expectations, and as economic data did not show any material worsening. The mantra now seems to be ‘not so bad is the new good’.

On the economic front, the picture is mixed, but some stabilisation is in sight. The manufacturing outlook remains weak in developed markets (DM), however resilient emerging markets (EM) growth is supporting the global economy. The service sector has been robust almost everywhere and we don’t see any major concern on the US consumer front, the main engine of US growth. In our previous editions, we highlighted our view that global recession fears were overdone and we maintain that stance. From a geopolitical perspective, the situation is tricky in many parts of the world, such as Latin America and Hong Kong, but there is good news in Europe, where the risk of a no-deal Brexit has receded. Investor sentiment is finally turning more positive for Europe after very difficult years.


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