Investment Perspectives, July 2017

In this mid-year publication, we review our January expectations and analyse some current key economic indicators before outlining the asset allocation that we recommend for the second half of the year.
We had increased our equity allocation at the beginning of the year
On the back of our positive macro-economic and equity outlook for 2017, we positioned the portfolios dynamically by increasing the allocation towards the equity asset class. We had also expressed our confidence that equity prices should be supported by an acceleration of global earnings’ growth and, so far, this has effectively proven to be the case.
We had reaffirmed our strong conviction on emerging markets and our early-year global equity exposure was well diversified into the different regions. We have since increased our allocations towards European and also emerging markets equities. Hedge funds were an area of concern following a disappointing 2016 performance, but the different funds to which we are exposed have performed much better so far this year and contributed to the strong performance of portfolios.

Global growth has not been derailed by the many political and geopolitical events
Global economic growth is broad based and, for once, has matched expectations. Contrarily to the previous years, growth forecasts have been upgraded generally as confidence is high and investment and trade are picking up from low levels. Europe was facing a series of elections that could have had negative consequences for the European project, but populist candidates failed to beat those in favour of more European integration. The election of Emmanuel Macron as French president has boosted the chances for serious reforms in France and for stronger unity in Europe, especially at a time when economic growth in the Eurozone has surprised on the upside. Donald Trump’s administration continues to make many headlines but is struggling to introduce a new health bill and much promised pro-growth reforms. US equity markets have so far proven to be resilient to such disappointments.



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