Growth forecasts are higher, but just a bit.
Labor, housing, and banking, especially in Europe and US will keep growth below trend.
Very weak politics will be weighing on Euro Currency, debt and assets, and doubt about US recovery will keep pressure on the US Dollar.
Emerging markets will be encouraging with a nice growth, but will need to fight inflation risks.
The main themes are:
Currencies
Overall, I would keep the EUR (bad credit) and the USD (weak economy) exposures as low as possible.
To replace EUR, i like CHF and against USD, i would buy CAD or XAU.
Then, in term of diversification, i like AUD, BRL. I would avoid JPY but i replace with CNY and SGD.
Credit
Underweight,
In the US, the rates are starting to go up and in Europe, the govies spreads are showing that the markets does not have any appetite.
The only interest for me would be in AUD and BRL, as the return with an excellent debitor is already interesting.
Stocks
On the optimistic side, i like energy, commodities and luxury stocks.
I avoid global banks. I am tempted to buy asset management companies and country leaders in online banking. Also to avoid credit risks, i like ETF’s.
Commodities
I overweight commodities position. Yes, as I believe in a weak U.S. dollar.
The main drivers being higher emerging market capital flows and higher rates as a reaction to inflation and further U.S. QE.
Good luck
Charles-Henri Sabet
